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New business contract? Keep these clauses in mind

On Behalf of | Mar 1, 2022 | Business Formation |

Every business has contracts that it has to abide by or use to make sure it protects itself. Your business contracts need to be protective, easy to understand and legally binding.

Some of the most common clauses to add to business contracts include liability clauses, termination clauses and payment clauses. Why add these? They’re helpful for getting you paid, minimizing your liability in the case of damage or an injury and giving specific terms about when you can end the contract.

Understanding your liability clause

A liability clause is beneficial, because it can help you minimize the risk of liability if your client or customers are injured or the work you do is faulty. Determining who will be liable in the case of problems is helpful, as is determining preferred methods of resolving conflicts.

Adding a termination clause

A termination clause is another clause to add, because it dictates when a project may be terminated and how that may impact pay. For instance, if you take a deposit, work on the project for three hours and then are told the project is being cancelled, will you be paid in full? A termination clause would explain what happens next.

Developing a payment clause

Finally, make sure you always have a payment clause. You should have detailed information describing how you will be paid for any project or work you complete. For example, if you want to ask for payment up front, you can, but you should include that in your payment clause. You should also include payment deadlines and information on what happens if you are not paid on time.

You may even add late fees to the contract, so you have some leverage to prevent late payments and will be paid more at a later date if the other party doesn’t pay on time.

These are three clauses most business contracts need. The specifics of your contract will vary based on what it’s for, so it’s a good idea to go over common clauses in contracts such as yours and to be sure that it is as protective as possible before it is implemented.