Common Mistakes That Lead to Contract Disputes

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Contracts are designed to ensure that business interactions go as smoothly as possible. Contracts set out the obligations to which each party is committing themselves, as well as the repercussions of either failing to meet their obligations or otherwise breaching the terms of the agreement. Because contracts quite literally spell out what is expected of all the involved parties, and the consequences of failing to live up to these expectations, they are an effective way of avoiding otherwise potentially lengthy and expensive disputes between business entities.

While contracts are an excellent mechanism for making any business deal a more certain and secure proposition, like any tool they are only as effective as the way in which they are used. There are certain pitfalls which businesses fall into with alarming regularity, and when they do, contracts suddenly become sources of legal difficulty.

Here are some of the most common mistakes that tend to end in a contract dispute and potentially very costly arbitration.

Failing to Build Trust

Contracts set out very clearly the terms of any deal, but they should also be underpinned by a sense of trust between the parties involved. When there is a lack of trust between the different signatories of any contract this can invite conflict. From the earliest stages of negotiations, you should demonstrate that you can be trusted. Once you have shown that you are willing to act in good faith, you can then begin to ask your partners to do the same. Be wary of any potential business partners who don’t want to engage with you or don’t show a willingness to demonstrate their trustworthiness.

Skimping on Legal Representation

In order to avoid contract disputes with large companies, it takes someone with experience to navigate their way effectively through the negotiating process and then to commit the agreement to paper using the correct language. When businesses assume that writing a contract is easy and either attempt to do it themselves or have the papers drawn up by someone with limited experience, they are just asking to run into trouble. In some cases, a simple punctuation error can have significant ramifications.

Being Aggressive

A common factor in contract disputes is that one party to the contract is attempting to micromanage every facet of the agreement. It is of course important that oversight is maintained so that both parties are satisfied that the other is keeping up their end of the agreement. Problems arise when one side starts trying to take control and is constantly looking for lapses and breaches as if this is what they expect. This demonstrates a lack of trust and invites disputes.

Having a contract in place will make most of your business dealings go much smoother. Having the terms of any partnership clearly laid out, having been negotiated and agreed upon beforehand, means that from the very beginning both parties know what is expected of them so they can then begin planning to meet those obligations. Contract negotiations are an art form and they need to be undertaken with experienced individuals on hand to consult and assist.

Colin Shaw
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Written by Colin Shaw

Colin has been in the finance market for over 20 years and specialises in best business practice to make an organisation profitable. The only man for the job when it comes to numbers and accounts with a keen talent for simplifying finance for the wider market.