How to write a business contract
Derek Tallent
By: dtallent
Read in 6 minutes

5 Keys to Write a Solid Business Contract

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If you are looking to open or expand a business, you’re going to need to hire workers. You may want to hire these workers full time and make them employees. To make someone an employee, you’re going to have to write up and employment business contract. At first glance, contract writing for small businesses may seem like no big deal.

But here’s the thing:

Writing contracts is hard. Even one vague term or typo can cause confusion and even a lawsuit. Things get even more tricky when you have to consider federal, state, and local laws. We’re going to try and clear up five of the most important things for business owners to know about contracts.

Five Elements of a Solid Business Contract

As we just mentioned, business contract writing for small businesses can be complex. But following these 5 simple tips will get you well on your way to writing a clear and legal contract.

1 Get It In Writing

Oral contracts can be legal and valid in certain circumstances. But you should always try to get your contracts (and the employee’s acceptance of said contract) in writing. This makes the terms clear to you, the employee, and any outside party that steps in to resolve disputes or handles lawsuits.

2 Use Precise and Clear Language

Vague or ambiguous terms in a contract can cause confusion between the employee and you. They can be used against you if the employee has a good lawyer. Your employee should understand exactly what you mean by each provision of the contract. You also have to be careful with your use of adverbs and modifiers (“quickly”, “knowingly”, etc.). Take the following phrase as an example: “The employee must quickly read and respond to work schedules when they are released”. This provision makes it clear that they have to read the schedules quickly. But it leaves it open to interpretation on whether or not the employee also has to respond quickly.

Now let’s look at a better phrase:

“The employee must quickly read and quickly respond to work schedules when they are released”. This makes it clear that quickly applies to both “read” and “respond”. This may seem nitpicky, but it makes a big difference in a contract term.

3 Define Important Terms And Parties

At the beginning of most business contracts, the writer will often define certain words. These are words that will appear in the contract many times.

Let’s look at another example:

“The Employee must work 40 hours per week”.

Seems pretty clear-cut, but who exactly is “Employee” referring to? Most businesses have more than one employee. That’s why it’s a good idea to define “Employee” as applying to the person accepting the contract. You can also use the person’s name in the place of “Employee” to make it even more clear who the contract applies to. Define also terms like “Benefits” or “Compensation”. This is to show what exactly they mean in the contract.

4 Write Numbers With Numerals And Words

This may seem unnecessary, but it is actually a great way to cover your bases. When you write a lot of contracts it can be very easy to misplace a number or a comma, which can have disastrous results. If you have the number written out in words as well, you protect yourself from little typos that completely change the numbers in your contract.

5 Avoid Phrases That Can Have Legal Significance

There are some words that may seem straightforward to most people. Yet, they can have a different meaning and context in a legal document. Calling someone an agent may seem like a simple designation, but, under the law, it changes how they can deal with potential clients. Make sure that if you use any of these phrases, you know their legal significance, or you could say something in the contract you don’t mean. For a list of some of these terms and their legal significance, check out this glossary for business owners.

Contract Resources For Business Owners

Contracts are a complicated subject, and it’s impossible to cover everything in this one article. That’s why we’re providing you with this database from findlaw.com. Here you can find relevant state laws, example contract forms, and more.

We hope that this article has shed some light on the importance of contracts for small businesses. If you follow the five tips described above, you should be well on your way to writing contracts that won’t end in a lawsuit. Be sure to also head on over to our website to get even more tips on marketing, financing, and managing your small business.

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