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Form contracts may be free, but business disputes could follow

| Oct 29, 2014 | Business Contracts & Disputes |

Many small businesses and entrepreneurs in North Carolina and elsewhere may be tempted to access free documents on the Internet,  and to use these free sample forms as actual contracts in their business affairs. Generally, that’s a risky way to save business expenses, due to the relatively high risk that the document may contain a number of ambiguities and irrelevancies to the contract at hand. The chance of later business disputes and even business litigation increases when a layperson attempts to construct a legal contract from form models.

Whenever possible, the businessperson should obtain the professional input of an attorney experienced in business transactions. A professional will assist in making the terms of the agreement clear and understandable. The best agreement contains language that does not encourage several different interpretations or hopeless ambiguity. Terms that are familiar to a certain industry should nonetheless be defined clearly in the agreement – that will cut down on misunderstanding and competing definitions later on.

Remember that it may be ultimately cost-productive to have documents reviewed or prepared by professionals — the prospect of disputes and litigation in future years will be reduced significantly. In North Carolina and elsewhere, it may be helpful to include a provision for alternative dispute resolution in small business contracts. Additionally, it is generally helpful to require a dissatisfied party to send notice to the other party prior to the right to take action on a disputed agreement. This procedure may stimulate early negotiations prior to filing of expensive litigation.

Other basic principles are associated with good contract practice, both here in North Carolina and elsewhere. Where possible, define precisely what the damage will be  if one of the parties breaches the agreement. State that each party signs the agreement intending to be legally bound by it, and that the terms have been read and understood. Business disputes are generally inevitable, but their resolution may be greatly facilitated by using well-written and constructed legal agreements.

Source: bizjournals.com, “Practical business advice for entrepreneurs and top executives“, David G. Bates, Oct. 27, 2014

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