Businesses have many reasons to negotiate contracts. Contracts with new workers can help them secure skilled labor. Contracts with other companies could lock in prices and delivery dates for necessary materials or clarify expectations for a service provided by an outside organization, such as payroll and accounting support.
One of the most common mistakes businesses make when negotiating new contracts is the decision to just use a boilerplate document, possibly one located via a quick internet search. However, creating customized, unique contracts can offer much better protection for the business. For example, the three contract inclusions below could all prove beneficial for companies negotiating new agreements with outside parties.
Non-disclosure agreements
The success of a business often depends on the careful protection of operational information, including trade secrets. Employees and outside businesses that support an organization may have access to information that could undermine a company’s competitive advantage or damage its reputation with the public. The decision to include a non-disclosure agreement in a contract with a vendor or new employee can help protect key company secrets and the organization’s reputation.
Penalty clauses
Perhaps there are concerns that a party may fail to deliver important products or make payments on time. Penalty clauses can create specific penalties in situations where one party does not fulfill the terms of their agreement with the company. Penalty clauses often impose financial consequences for breaches of the contract. The addition of a penalty Clause both incentivizes better adherence to a contract and makes it easier for a business to obtain specific results in a breach of contract lawsuit.
Alternative dispute resolution clauses
Disagreements about a contract can arise for all kinds of reasons. All too often, those disputes snowball out of control and end up going to court. Court proceedings can be expensive and may make certain business information accessible to the public. Requiring that a party raising issues with the contract first attempt to resolve the matter through direct negotiations, arbitration or mediation before taking the matter to court could protect the privacy and finances of all parties involved in the situation.
There are many other potential contract inclusions that could prove beneficial for a business. Adding the right clauses to a contract can make a major difference in the level of protection offered by a new agreement.
