When Writing Contracts For Your Business, Don't Make These Four Mistakes
Posted on: 24 April 2019
Contracts are an integral part of business life — but you have to be careful that the contracts you make don't contain unenforceable clauses or provisions. The consequences of a badly-formed contract can be disastrous. If there's a dispute, your contract might be deemed partially or completely invalid.
Here are the things good contracts need to avoid:
1. Non-compete clauses that overreach
Non-compete clauses are common in the business world today — but that doesn't make them automatically enforceable. They have to be reasonable for a judge to be willing to let them stand if they're challenged. You have to give an employee sufficient consideration (something in return for signing the non-compete, such as a position with your company or a raise), and the agreement generally must be necessary to protect your business. It also can't be too long or too broad. For example, a non-compete agreement in the tech industry could easily be limited to a year since technology evolves so quickly. That's ample time to protect your business secrets.
2. Liability waivers for your clients
A lot of businesses include liability waivers in their clients' contracts — especially martial arts studios and gyms. But those waivers may not be worth the ink they're written with if they try to exclude your business from every possible liability. You can't force a customer to excuse you from liability if your business is negligent or an employee does something reckless or intentional.
3. Non-disparagement clauses for your customers
Several service providers tried this in the past — and it sparked a pretty fierce backlash. Businesses like caterers, wedding planners, photographers, and other similar enterprises were trying to control what their customers said online on review sites like Yelp! or Facebook. California flat-out banned such clauses, and they're generally deemed to be unconscionable.
4. Mandatory non-disclosure clauses for victimized employees
Another thing that's changed with the times is the use of mandatory non-disclosure clauses in contracts that prevents the victims of sexual harassment and discrimination from speaking out. In the past, such clauses were routine — but the #MeToo Movement has made it far less socially or legally acceptable to try to put employees in a trap where the victims are silenced. Those kinds of clauses are now largely seen as abusive and only designed to protect the abusers.
As important as contracts are, you want to make certain that your business gets them right. A business lawyer can help you draft contracts that are worry free and functional.
Share