Contracts and Business Decisions 
Solid contracts are the foundation of any business transaction. Resolving contract disputes can be very time consuming and expensive. Here are some steps you can take to try and avoid misunderstandings.
Document business agreements in writing. Verbal understandings are extremely difficult to enforce and ultimately, can be very costly to your business. If there is a dispute, not only are you unlikely to get paid the full amount involved, but you risk looking unprofessional to the other party.
Document changes. Business owners frequently run into issues when they agree to undocumented changes to their written agreements. Typical types of changes include modifying the scope of a project, changing the completion date on a project, or adding another service that isn’t directly addressed in the original agreement. Often these changes are demanded and agreed to under tight deadlines when you are in a hurry to proceed with the job or complete the project. Usually, the simplest way to handle these changes is by an amendment signed by all parties. Unfortunately, once a dispute arises, it’s too late to go back and document your changes in writing.
Approve company decisions. Whether you own an LLC or a corporation, be sure to document company decisions and authorize managers, officers or others to take actions on behalf of the company, either by keeping minutes of meetings or preparing written consents reviewing and approving decisions. Corporations are legally required to hold annual shareholder and director meetings. While LLCs are not required to hold annual meetings, it is a good idea to have a record of financial and business decisions.
Important contract provisions. While each agreement is unique, there are several items you want to be sure to cover.
Parties. While it seems straightforward, properly identify the parties to the agreement. Enter agreements on behalf of your business, not in your individual capacity.
Services and Scope of Work. Clearly state the services you are providing or the products are you selling. Specify any contingencies that must be met before you perform. Address how changes in the scope of the project will be handled.
Deadlines and Penalties. Identify any deadlines or benchmarks that must be achieved. Specify the consequences if these are not met.
Compensation. Specify how much you be paid and when. Outline the consequences of non-payment.
Term and Termination. List the term of the agreement and the options the parties have to terminate it.
Representations and Warranties. Explain any representations you are making and any warranties you are providing, either through your business or passed on from a manufacture. Clearly state any items you are not warranting or results you are not responsibility to achieve.
Insurance. Specify the types, terms and coverage amounts of any required insurance. Specify any named insureds.
Indemnification. Indicate any indemnities the parties are providing to each other, such as for prior acts.
Resolving Disputes. Explain how disputes will be resolved, such as through mediation, arbitration or litigation. Specify who pays for these costs.
Confidentiality. Identify what information is considered confidential.
Intellectual Property. Identify who owns the work product created.
Business owners should consult with their legal advisers for interpretation of specific requirements concerning their agreements. For more information on these and other business legal matters, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or kathy@tremmellaw.com.
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