Litigation is always costly and time-consuming. Extended litigation could even prove fatal to new businesses and to smaller companies. Well drafted contracts can greatly reduce the chances of becoming involved in expensive lawsuits, and the cost of hiring an attorney to draft business contracts is money well spent.
The Small Business Administration conducted a study in 2005 on the effect of litigation on small businesses. The study found that litigation causes significant financial hardships to small business, as well as causing emotional stress to business owners, often changing the tone of the business, often permanently. Results of the study can be found here. Business owners also find themselves making unnecessary concessions, like reducing invoice amounts, in order to avoid litigation.
When Are Business Contracts Needed?
- Employees: An employment contract can clearly state the time commitments and duties expected of employees. Clearly stated expectations for dress, behavior, overtime, sick leave, and other job details will reduce unemployment claims and other possible lawsuits by disgruntled employees.
- Independent contractors: A contract should be signed whenever an independent contractor is hired. If the contractor is hired for more than one job, there should be a separate contract for each project. The contract should specify the rate of pay, the type and quality of work expected, and the deadline for completion of the project.
- Suppliers: Often, suppliers will have their own contracts or purchase orders, but if they do not, the you should be prepared with your own.
- Customers: Written contracts with customers are vital to the smooth, successful operation of any business. Misunderstandings with customers account for a large amount of business litigation. Without a written agreement, business owners often find themselves having to do extra work or reduce their prices after a job is done, just to satisfy a customer. If both parties have a clear, written understanding of the scope of the job, the agreed upon price, and other details, these unexpected adjustments can be avoided, or at lease minimized. Without a written contract, a business owner may not be able to collect late fees, interest on unpaid balances, or attorney's fees, if you have to sue a customer for payment.
The Role of a Business Attorney
An attorney can help draft standard contracts for your employees, suppliers and customers. When a situation arises in which a standard contract is not appropriate, a business attorney can draft a contract that will protect you and your business. If you are presented with a proposed contract by a supplier, customer, or other party, make sure to have your attorney review the document before you sign it. If necessary, your attorney can negotiate changes in the contract, or may even advise against signing altogether. Visit Rust Belt Law at https://www.RustBeltLegal.com/ or call (814) 315-9255 for more information about how a business lawyer can save you money, make your business more profitable, and reduce the chances of becoming involved in lawsuits.