In times of stress, communication can get out of whack quickly. It’s never been more important to get your agreements in writing, not because you expect the other party is not going to honor their word, but because you need to make sure you both know what the agreement is.
Here are my 10 practical tips for creating a agreement that both of you can agree to.
( 1 ) Get it in writing.
You can technically have an oral agreement and in many cases they are still legal. But memories fade. Save yourself a lot of hassle and get an agreement right at the beginning. The last thing you want to do is try to come up with an agreement when both sides are fighting.
( 2 ) Keep it simple.
You don’t need a bunch of legalese to make it legal. Use language you both can understand. Oh, and make sure you number the paragraphs so you can refer back and forth.
( 3 ) Make sure agreement is signed by the right person.
Although technically a representative of a company can make and sign an agreement, it’s much easier to make sure you’ve got the right person and their company title on the agreement.
( 4) Identify each party correctly.
I touched on that a little in 3. above, but this is important enough to stand alone. Include the person’s name and their role in the company. Plus, of course, list the company with the proper business entity. For example, “Purple Bananas, LLC (a Nevada Limited Liability Company)”.
( 5 ) Include the details.
This is especially important if you’re doing an independent contractor agreement. Make sure you spell out the responsibilities and authority of each party.
( 6 ) Specify payment.
Include how much and how often payment is. What if payment is late? Can credit cards be used for payment? What if work isn’t performed?
( 7 ) Outline procedure for termination.
I like to have 30 day cancellation policies for each party when it comes to ICAs. For other things, like buy/sell, this wouldn’t be applicable.
( 8 ) Agree on a way to resolve disputes.
Write into your agreement what you and the other party will do if something goes wrong. You can decide that you will handle your dispute through arbitration or mediation instead of going to court. Ironically, though, arbitration is often more expensive to both parties than a court case.
( 9 ) Pick a state law to govern the contract.
If you and the other party are located in different states, choose the state for mediation, arbitration and legal actions. State law varies, so consider carefully.
( 10 ) Confidentiality agreements.
I can’t stress this one enough. You need a confidentiality agreement on the agreement as well as anything related to your business. What happens if the confidentiality is breached? I’ve had ICs just go crazy and the only thing keeping them in check is a confidentiality agreement with teeth.
Above all, though, get an agreement in writing. You don’t have to start one from scratch and you don’t have to pay a lawyer tens of thousands of dollars to draft one for you. Here’s a great deal on 97 agreements that your business can’t live without: 97 Agreements