Dig into the details with Utah business contracts
Contracts are among the most common pieces of paper that business owners will encounter in their work. Although they can be daunting, they are also necessary in order to ensure that two sides of a business transaction each deliver.
There’s much to think of with contacts and how they operate, and a lot of it comes down to careful reads if you are presented with one, as well as foresight and planning if you’re drawing up the contract.
Planning is also important with financial matters, and First Utah Bank has options for you with business banking to meet your cash flow needs.
What to remember with contract drafts
A great resource for all things legal is the Nolo website, which publishes information small companies need to best do business. They have some great advice when creating a contract, including some considerations that might not be as obvious. Some advice on this topic includes the following:
Go for clarity: It’s best to not make it sound like a contract, with cliches from the legal world that actually make things less easy to understand. Go with concise and clear sentence structure with numbered headlines that mark each part of the contract.
Check IDs: It’s important to make sure you have the complete, legal name of your own business as well as the parties in the contract. Examples of this is to use LLC, Corp. or Inc. as needed.
Make it clear who pays, and how: Don’t just spell out who pays whom in the contract. Also talk about how the payments take place with a timetable that includes dates, times and specific requirements as needed. Method of payment is also a good idea to detail.
Reach agreement on resolutions: It’s important to set straight what happens if there’s a dispute in the contract. This could be the spot where you can avoid court proceedings, and instead consider arbitration or mediation as a way to resolve disputes.
Be sensitive: It’s important to have a clause that makes any business dealings or information that is discussed confidential and to have all parties agree to that. This is not just to build trust but to also prevent any proprietary business information from getting out into the public sphere.
Putting the contract under the microscope
Corporate attorney Robert Couch from Salt Lake City talked to Utah Business magazine about the possibly unusual parts of the contract for which business owners should watch out. It’s not that it’s a sneaky situation, but these are definitely buried deep in a contract and could affect future business dealings with a business partner or client.
Exclusivity: If you are working with a vendor, it will be good to check if they’re requiring they be the only supplier of a good or service, especially if that’s tied to any type of discount. It may also raise a red flag. “Products should be purchased from a supplier because the supplier has earned your trust not because you are contractually precluded from purchasing from anyone else,” Couch notes.
Statute of limitations: It’s possible that the time in which you can dispute the contract is under a compressed time period. Make sure to find that part in the contract and be sure it is to your advantage.
Automatic renewals: This is where a company will give the terms of automatic renewal, whether it is year-to-year or some other time period. Also note that most contracts have a requirement for written notice to end a contract, usually 30 days, before the auto-renewal takes place.
Breach of contract damages: Note how high or low the cap on damages is set in your contract, making sure it will be enough to fully compensate the company and that it should be subject to standard exceptions, such as obligations to a third party.
Ending the contract: Some contracts have a clause where a contract can be ended for convenience instead of only by specifics. If that’s the case, make sure you don’t get penalized for using that part of the contract.
Venue for lawsuits: Keep an eye out for this one, as some vendors may pick a jurisdiction that would give them what Couch calls “a home-field advantage.”
Looking for these contractual concerns will help prevent headaches in the long run, according to Couch. “They will often include unexpected provisions buried deep in the fine print that could prove problematic in the future and should be carefully watched for,” he writes.
Business banking in Utah includes free checking option
As you continue to work through all of the different aspects of running your own business, including contracts, you also need to put the tools and systems in place to make running your business easier. If you run a business that averages fewer than 100 ACH checks and debits per month, First Utah Bank offers free business checking as a method to maximize your time when managing these essentials.
There’s no minimum balance required for the free business checking program at First Utah Bank and it includes unlimited debit card transactions and deposits as well as free mobile and internet banking. The program is also insured to the legal maximum by the FDIC.
If free checking isn’t quite the right fit, there are other options being offered by First Utah Bank. Among them is a commercial checking account for higher transaction volumes that also gives you an earnings credit allowance based on your balances.
First Utah Bank has the knowledge and the resources to make business banking in Utah the best it can be for any company in the Beehive State. Learn more at our business checking website, or call First Utah Bank at 801-308-2265.