What Should Be in Every Contract to Help Avoid Litigation

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What Should Be in Every Contract to Help Avoid Litigation

Contracts govern the terms of business relationships and provide important protections for all parties involved. There are certain items that should be included in every written contract or letter of agreement to clarify the nature of the business relationship as well as minimize risk in case of litigation. These include:

Official names of the parties to the agreement. If you are signing a contract on behalf of your company, it is imperative that you do not sign with your own name but instead with the name of the company. Signing with your own name may lead to legal liability for you personally in case of default. There are some instances where you may be required to use your own name — for example, if you are signing as a personal guarantor.

Performance. This part of the contract outlines what each party must do to perform the contract. It should include details on compensation for goods or services and expressly outline what the other party must do to receive the compensation.

Performance time limits. Typically, contracts include time limits on performance — i.e., the goods or services must be delivered within a certain timeframe or in increments of time that are consistent with the intent of both parties to the contract. Some contracts are open-ended with performance expected only at some future time. Time limits on performance of the contract should be detailed as specifically as possible to avoid potential confusion that could lead to litigation.

Payment time limits. Contracts should detail when payments are to be made and any consequences that will ensue if payments are not made on time — for example, late fees, interest charges, or attorney fees in case a collection action is necessary.

Enforceability. There must be clear language that a contract has been accepted by both parties and is in effect in order for the contract to be enforceable.

Dispute resolution. A contract should include language that specifies how disputes are to be resolved. In order to avoid expensive litigation, parties to a contract often opt for dispute resolution via an alternative dispute resolution method such as mediation or arbitration.

Governance. Every contract should include a governance clause that identifies which state’s laws will govern the contract. This is especially important if the two contracting parties are located in different states, as the cost of litigation increases if the parties must dispute the proper venue.

Our highly technological and innovative approach to contractual matters allows us to successfully take on opponents and law firms of any size, save costs, and obtain more successful results. If you need experienced litigators representing your business interests, contact Williams Mestaz for advice at (602) 256-9400.

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