THINGS TO CONSIDER IN WRITING A BUSINESS AGREEMENT
Being an entrepreneur isn’t the most straightforward task. One minute you are sorting orders for your customers, and the next minute you are researching the best ways to sell your business. We have high respect for people who engage in entrepreneurship.
We decided to create a platform that serves as a bridge between sellers and customers – Kusnap. So now, buying and selling are easier as vendors can now directly connect with their customers.
Through conversations with vendors, we hear their various pain points. And we also see that some circumstances are usually common with all vendors, one of which is drafting a business agreement.
The fact that you are a vendor does not mean that you will not collaborate with other vendors. For example, a food vendor may need to collaborate with a logistics company to ensure a smooth delivery process.
In such a case, there will be a need for a business agreement to ensure that all parties are o the same page.
Since one cannot escape coming in contact with a business agreement as a vendor, this article will highlight essential tips that will come in handy when writing a business agreement.
Tips for writing a business agreement
If you are ever in a situation that requires you to draft up a business agreement, below are some tips to follow:
- Involve a professional: As a business owner, it is only regular if you want to be involved in drafting the business agreement. However, you will also need to involve the help of a professional as they are in the best place to ensure that you are not shooting yourself in the leg. It is always best to have a lawyer when drafting a business agreement, as they know the legal terms better than you do. A lawyer knows the correct components in a business agreement and ensures that no party gets cheated. Sometimes, it could be that you are not the one writing the business agreement as you only need to sign it. Even in such a case, you will need a lawyer to ensure that the agreement is fair and doesn’t breach your rights.
Typically, every business needs a lawyer for various reasons, one of which is when there is the need to draft or sign a business agreement. The worst mistake would be going into it blindly and later realizing that you made a mistake.
If you have not gotten a professional yet for your business, it’s time to engage the services of one.
- Keep it simple: One handy tip to keep in mind when drafting a business agreement is to remember to keep it simple. The fact that you are writing a business agreement does not mean that you have to use complex words or sentences. Once your agreement becomes complicated, you will put the other party in a tight position, which isn’t for the best.
The essence of a business agreement is for both parties to understand what they are getting into clearly and for everyone to be on the same page. Therefore, it means no need for complicated words or sentences.
In addition, your business agreement shouldn’t be too long as you may lose the other party’s interest. Finally, a business agreement should be understood by even lay person. One should not need to have a lawyer with them or carry a dictionary before understanding a business agreement.
Once you notice that your business agreement is beginning to seem wordy or complex, it means that you are headed south, and you will need to edit or rephrase the deal. It is always best to note that simplicity is critical in drafting a business agreement.
- Spell out all details: No party has to be in the dark when entering into an agreement. An agreement entails transparency, which is what you have to input when you are drafting a business agreement. For example, you are trying to hire technicians for your business.
When drafting such an agreement, you must spell out all the details. It could be what you expect from the technicians and their job roles. You can also include the times you want them available and their remuneration. It is always best to explicitly state these out to ensure they are okay with the situation.
These technicians can go through the agreement and details and state if it suits them. If they are not okay with it, they can also make tweaks. The goal is to ensure that everyone is on the same page.
It would be disastrous for you to start working with anyone when they are unclear about all the details, as it could lead to disagreements later in the future. In addition, a business agreement ensures fairness in all transactions and eliminates conflict and friction from happening later as the business continues. Therefore, you must input all details.
- Correctly input all parties involved: A business agreement isn’t complete until you correctly input all the parties in the accord. In this case, it has to be the name of everyone who will be involved in the contract or business process. The importance of inputting their names is to ensure everyone goes through the agreement and signs accordingly.
It could later be a problem if someone involved in the process doesn’t sign, as they can later say that they were not informed about a process or did not agree to the terms and conditions.
Thus, you need to ensure that there is no room for such a situation to occur in the future.
- Clearly state termination or expiration terms: When does the contract end with the vendor? It is always important to clearly state the stop or expiration period and times when you are writing a business draft.
With this, everyone involved in the business process understands the work’s duration. In addition, they also know what could warrant termination in the business process. This way, they are not caught unawares when it happens, and it also helps everyone involved in the process to tread carefully to ensure that they do not do what will warrant a termination.
But they wouldn’t know when or where they err if you did not clearly state the termination or expiration terms in the business agreement.
- Do not omit important dates and deadlines: If there is anything that shouldn’t miss from a business agreement, it is your timeline. These timelines guide all the involved parties in carrying out the deadlines. With the deadlines, all parties can know execution timing and work hard to ensure they do not default on them.
However, you cannot hold anyone accountable if you did not state actual dates and deadlines on the business agreement. If anyone defaults on them, there will be nothing to use as a reference. So, you cannot fault them or hold them responsible.
Knowing that word of mouth does not hold water when it concerns a business agreement is best. Thus, it is vital to put everything into writing so one can easily reference it at any point.
- Attach a glossary of terms used: We had earlier mentioned that it is always best to keep a business agreement simple to ensure clarity as you do not want anyone to get confused while going through the document. However, it could be that there were unavoidable moments where you had to use specific terms that are not common to a layperson. In such a case, attaching a glossary of terms to the document is suitable. This way, people can go and check the meaning of certain words that may not be familiar.
We always say that the world is a continuous learning ground, and people learn new things daily. And, the business agreement could be what teaches them something new. Therefore, attaching a glossary of the terms you used in preparing the document isn’t inappropriate.
- Make provision for signatures: Let us tell you your business agreement is incomplete if there is no place for signatures. Yes, you have prepared a fantastic document and clearly stated all the correct information for all parties. But, where is the space for each party to sign?
There will be no official agreement if no party appends their signature on the business agreement. So, the document signing shows that they consent and agree to what you have written and are willing to work with the terms and conditions.
But, one can deny the document if their signature isn’t on it.
- Add state or federal laws that govern the contract: Recall how we mentioned that you should engage a professional when preparing a business agreement? It ensures they use their expertise to link the agreement to the regional laws.
It is always important to cite the state or federal laws that govern the contract in the document to show that the listed terms and conditions are legal and you are not trying to defraud any party. Furthermore, it assures everyone that signing the document will not put them in trouble with the authorities as they will not be going against any constituted laws and regulations.
Drafting a business agreement understandably comes with lots of questions. Some of them include:
What should be in a business agreement?
A business agreement should have the terms and conditions of the contract, names of all concerned parties with signatures, critical timelines and backing laws in it. These are essential when drafting a legal and proper business agreement.
Why should I have a business agreement?
Once you get into a contract with anyone, you need a business agreement to ensure everyone does their assigned tasks. It assures you that no one is out to trick the other as the business agreement keeps everyone in check. Since they signed the document, all parties know that there will be penalties if they falter on the business agreement.
No matter how much you trust the other party, drafting a business agreement when getting into any contract is always important. You will write an appropriate business agreement when you follow the mentioned tips.