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Steps to take to protect your business in a breach of contract case

On Behalf of | Mar 10, 2022 | Contracts

Business owners rely on numerous contracts and agreements to strengthen the organization and provide direction for their day-to-day operations. From vendor agreements to employee handbooks, it is not uncommon for a party to break the terms of a contract. Unfortunately, a breach of contract can lead to production delays, morale issues and the stoppage of business until the parties resolve the matter.

When drafting a contract, business owners are wise to take steps in the present to protect themselves in the future. While every situation is unique, business owners should write contracts with an eye toward:

  • Clear, concise language: Too often, business owners use vague terms or industry jargon when drafting a contract. Unfortunately, unclear writing or undefined terms can insert a significant amount of ambiguity into an otherwise straightforward contract. If one party breaches the terms of that agreement, they could ultimately argue that the language was confusing and unclear.
  • Consequences for a breach: While it might be a challenging discussion between two parties with an existing relationship, it is crucial that business owners include language surrounding what they will consider a breach and the penalties tied to that breach. With this language in place, the business owner ultimately has a signed document with clear consequences.
  • Restrictive covenants: Many organizations rely on restrictive covenants to protect their business and limit the damage a current or former employee might do. Common examples of these can include nondisclosure agreements, non-compete agreements and non-solicitation agreements. If the business owner writes these provisions to be too restrictive however – using broad language, lengthy time requirements or abnormal geographical restrictions – the court might deem the agreement non-enforceable.

Whether it is your first business venture or your fifth, it is crucial that you carefully write any type of contract with a potential breach in mind. This is not to say that business owners should write all contracts significantly slanted in favor of the company, but the writer should draft the document in a clear, professional manner.

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