Contracts are the foundation of every business relationship — and it’s essential to avoid making mistakes when reviewing, drafting, and executing them. Contract disputes can not only potentially lead to costly and time-consuming litigation, but they can also cause disruptions to business operations, loss of profit, and harm to a company’s reputation. In some cases, mistakes in a contract can also render the agreement void and unenforceable.
Here are five of the most common mistakes to be aware of in contract law:
1. Not Getting the Agreement in Writing
One of the most common mistakes in contract law is not putting the agreement in writing. While some oral agreements are enforceable, certain types of contracts must be in writing under Oklahoma law in order to be legally binding. Specifically, contracts that must documented in a written agreement include the following:
- Contracts that cannot be performed within the period of one year
- An agreement to answer for another’s debt
- A contract for the sale of real property
- Contracts for the sale of goods $500 or more
Nevertheless, even if it is not required, putting a contractual agreement in writing can help to protect both parties from the possible legal issues that could arise — as well as provide them with clarity regarding their rights and responsibilities.
2. Using Boilerplate Agreements
Contracts should be specifically tailored to the needs of the parties and the circumstances surrounding the transaction. Critically, using a boilerplate contract is a common mistake in contract law that can present a number of issues. These types of agreements are typically found online and contain general, standardized language that could appear in any contract and have no bearing on the terms of the transaction.
While they can save money in the short term when it comes to drafting and reviewing, a boilerplate agreement can sometimes lead to risk. For instance, boilerplate contracts do not always define the conditions of the business relationship or provide for contingencies. In other cases, they can contain “cut and paste” errors or include irrelevant provisions. Boilerplate contracts can be a good starting point to create a contract, but they have many limitations and should only be used for reference.
3. Using Ambiguous and Unclear Terms
Ambiguous terms in a contract can leave a clause open to multiple interpretations, result in financial losses, and cause strained business relationships. To avoid this common mistake in contract law and any disputes that can arise from it, contractual agreements should contain language that is clear and straightforward. Not only can ambiguities lead to confusion as to each party’s obligations, but it can also result in litigation.
The best way to avoid ambiguities in a contract is to define the key terms in the document. This can ensure all parties to the agreement have a clear understanding of the meanings of the important terms used, reducing the risk of disagreement. Similarly, it’s essential to keep the wording of a contract simple — and avoid unnecessary technical terms that would make the document difficult to understand.
4. Failing to Include a Termination Clause
A termination clause is an integral part of any contractual agreement. It explains the reasons the agreement will come to an end and aims to minimize the likelihood that the parties will need to litigate any disputes regarding the conclusion of the contract. Failure to include a termination clause in a contract can lead to loss of control over the terms and duration of the agreement. It can also impact your reputation — by terminating a contract without a specified reason or proper notice, you may be viewed as unreliable or unethical. Having a well-drafted termination clause in your agreement can prevent these kinds of problems and ensure your interests are protected.
5. Not Having an Attorney Review the Contract
Importantly, a contract is a legally binding promise between two or more parties that can come with long-term implications for your business and its bottom line. Even if you think you understand the terms of the contract, it’s vital to have an attorney review the document before you sign it. An attorney can identify any ambiguities that could potentially lead to litigation, make certain the document reflects the true intentions of the parties, and safeguard your interests. Since attorneys have the knowledge, experience, and training necessary to understand the consequences of a contract, they can ensure the agreement reflects your objectives and is compliant with the law.
Contact an Experienced Oklahoma Contract Law Attorney
If you’re a business owner, a skillful contract law attorney can provide you with the legal guidance and support you need to meet your goals — and avoid the common mistakes in contract law. With offices in Tulsa and Claremore, Titus Hillis Reynolds Love offers trusted counsel and adept representation to businesses, corporate owners, and entrepreneurs for contract matters throughout Oklahoma. Contact us online or call (918) 216-0892 to schedule a consultation.
