Business Law Breakdown: Role of Contracts in Business

In our business, we help business owners with anything that arises within the operations of their business, which often includes negotiating and drafting all types of contracts. Our clients are encouraged to view contracts not only as something they just need when something goes wrong, but more as an instruction manual or roadmap for how a business relationship should work.

This approach has come from an observation over the years that most business disputes are not caused simply because one party is dishonest or is trying to intentionally do wrong to another, but because the party is in good faith, they often just have different assumptions about how the business relationship should work.

How can we minimize the misunderstandings that often lead to legal disputes?

Firstly, clarify the party’s expectations up front and document those expectations in writing. This is important for most, however, some contracts and business transactions are so simple and straightforward that you don’t really need a formal contract.

More complicated business relationships will benefit from having the time and effort put in early on to map out particular business relationships.

How will you know which relationships should have expectations in writing?

These complicated relationships can include or involve:

• Other owners of your business
• Your business partners
• Your manufacturer or supplier
• Your investors
• Your employees
• Anyone you do business with

When a client is entering into a new business relationship, they’re encouraged to clarify their expectations and discuss how the business relationship will work with the other party. Then, they should have the business relationship and all of its expectations documented into a formal written agreement, which will not only protect both parties down the road but also lays the foundation for how the relationship should work.

Have questions regarding contracts in business or legal disputes between business relationships? Contact our office.