Many entrepreneurs think that a verbal agreement will suffice. However, not having a written contract, or a poorly written contract, may very well lead to disputes between the parties and it likely to be costly down the line. Costs associated with not having a clearly written contract involve potential litigation and damage to a business relationship that may have otherwise been avoided.
A common mistake made by entrepreneurs in drafting contracts is not fully fleshing out or defining the terms of the agreement. Oftentimes, there is a disconnect between what one party thinks a certain provision means versus what the other party thinks the provision means. Such disconnect leads to guessing or interpretation and oftentimes litigation. At the onset of a business relationship, neither party should want to have to resort to guessing or interpretation when making a determination of their rights or obligations under a contract.
Drafting contracts should be a collaboration between the entrepreneur and their attorney. The entrepreneur should point out the nature of the contractual relationship and the related issues that are important to them. The attorney should think through the issues, potential pitfalls, and any matters that seem unclear. This collaboration can bring more clarity to the contract and help avoid conflict down the road. It is true that a little good writing goes a long way in keeping a business relationship on track.
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