Ten Tips for Making Solid Business Agreements and Contracts

by Attorney Shannon Miehe

Follow these guidelines to make an enforceable, plain-English business agreement or contract.

1. Get it in writing.
Although oral agreements are legal and binding in many situations, they're often difficult to enforce in court (and in some situations, they aren't enforceable at all). In the business world, most agreements should be in writing even if the law doesn't require it. A written agreement is less risky than an oral agreement, because you have a document that clearly spells out each party's rights and obligations in case of confusion or disagreement.

2. Keep it simple.
Contrary to what most lawyers think, you don't need a lot of "heretofores" and "party of the first part" legalese to make a contract enforceable. Instead, create short, clear sentences with simple, numbered paragraph headings that alert the reader to what's in the paragraph.

3. Deal with the right person.
Don't waste time negotiating a business agreement with a junior person who has to okay everything with the boss. If you sense that this is happening, politely but firmly request to be put in touch with the person in charge. Make sure the person you negotiate with has the authority to bind the business and has a vested interest in making sure the business performs its obligations under the agreement. If you're not sure who that is, ask. In a smaller business, it might be one of the owners; in a larger organization it might be a chief executive officer or chief operating officer.

4. Identify each party correctly.
You'd be surprised how often businesspeople get this wrong and how important it is. You need to include the correct legal names of the parties to the contract so it's clear who is responsible for performing the obligations under the agreement (and who you have legal rights against if things go wrong). For instance, if a business is organized as an LLC or a corporation, identify it by its correct legal name --including the Inc. or LLC suffix -- not by the names of the people who are signing the agreement for the business.

5. Spell out all of the details.
The body of the agreement should spell out the rights and obligations of each party in detail. Don't leave anything out; if you discuss something verbally and shake on it but it's not in the contract, it will be next to impossible to enforce. In the world of contract law, judges (with a few exceptions) may only interpret a contract from its "four corners," not from what the parties said to each other. If you forget to include something, you can always create a short written amendment. Or, if you haven't signed the agreement, you can handwrite the change into the contract. If parties initial the change, it becomes part of the contract.