Whether at the drafting stage, reviewing a document before signing it or facing courtroom litigation regarding a breach, the strength of a contract is crucial. Many businesses understand that a contract forms the backbone of any vendor relationship, employee agreement or restrictive covenant. Unfortunately, they often fall into traps that can damage the effectiveness of the document.
While every business agreement is unique, there are numerous issues that seem to be common across organizations. When drafting a contract, it is wise to avoid certain mistakes, including:
- Vague language: As a general notion, vague language can run the range from ill-defined deadlines and the consequences for breach of contract. If the business fails to properly describe factors such as due dates, the scope of the agreement and the provisions both parties must follow, it might be a challenge to hold the other party accountable through the legal process.
- Good faith: Many organizations rely on the general notion of good faith when describing contract terms. Unfortunately, good faith is often a subjective measure that introduces a great deal of gray area into the legal agreement. While a guiding principle, good faith fails as a contract term.
- Industry jargon and acronyms: Either from their vendor relationship or duration in business, many organizations use a sort of contract shorthand when drafting agreements. Using industry jargon or undefined acronyms might seem to save time in explaining each provision, it often adds area for potential legal disputes down the line.
When facing litigation, the business must worry about the contract and its enforceability. While certain language errors might be intentional, some organizations might feel that a well-targeted gray area could help them in court – creating a specific place they can center their arguments. It is better, however, to have a strong, well-written document that is valid, enforceable and contains clear language regarding the penalties for breaking the terms of the agreement.