Most business relationship starts with high hopes and handshakes. But even the strongest partnerships need clear ground rules to prevent future disputes. Many business owners learn this lesson the hard way when vague contracts lead to costly legal battles.
Including the right contract clauses can help shield your business from unnecessary risks and possible legal issues. Below are three you should consider including in all your contracts.
Know who to hold liable for mistakes with indemnity clauses
Think of an indemnity clause as your business’s safety net. When someone’s actions cause you financial harm, this clause makes them responsible for covering your losses.
Let’s say your supplier delivers faulty materials that lead to customer complaints. Having an indemnity clause helps ensure the supplier pays for any resulting damages and legal costs you face.
Set clear boundaries with liability limitation clauses
While indemnity clauses determine who pays for problems, limitation of liability clauses control how much they pay. More importantly, these clauses cap the maximum amount you might owe if something goes wrong due to your actions.
Liability clauses help you assess potential risks while protecting your interests. However, make sure the limits you set are reasonable and also provide adequate protection for the other parties.
Plan for the unexpected with force majeure clauses
Sometimes, things happen that nobody can predict or control. A force majeure clause protects your business when extraordinary events make it impossible to fulfill contract obligations. This clause covers situations like:
- Natural disasters
- Pandemics
- War or civil unrest
- Government actions
- Supply chain disruptions
When writing a force majeure clause, consider the unique risks your industry or business may face. These are the situations you’ll want to include in your contracts.
Protect your business before problems start
Strong contracts act like a business insurance policy you hope you’ll never need. While these clauses might seem complex, they provide essential protection against real-world problems that can harm your business.
Consider working with a business law attorney to ensure your contracts include these protections and match your specific needs. A small investment in proper contract drafting today can save you from major headaches tomorrow.
