Contract Drafting Tips

Have your client/customer sign a written contract! (even a one-page document can insulate you from payment headaches).

Ask your client/customer to complete a credit application containing bank account information. (verify the information!)

Obtain a personal guaranty (if appropriate).

Know your client/customer!

If a corporation or other business organization, inquire as to the place of organization and then check the state secretary's records (state databases are available on-line). Is the signatory authorized to sign? Is the "company" really a company? If not, who/what are they?

Before signing a document, read it carefully! Don't be afraid to negotiate. Have your lawyer explain any provisions you don't quite understand.

Provisions to include in your form contract:

Interest:

Be clear as to when payments are due. Specify the monthly interest rate on unpaid balances.

Collection Costs:

Put your client/customer on notice that they will be responsible for collection costs including reasonable attorneys fees.

Notice of default and opportunity to cure:

Require the client/customer to give notice of any dissatisfaction and provide you with an opportunity to remedy any problem.

Mediation and Arbitration provisions:

Mediation and Arbitration, as an alternative dispute resolution techniques, has are become very popular. Many contracts contain a mandatory mediation and/or arbitration provisions. Make sure you understand these provisions. Be aware of potential pitfalls: who bears the cost; who chooses the mediator or arbitrator; what happens if there is no response to a request to mediate/arbitrate; what happens should non-binding mediation fail to resolve the controversy.

Limit liability:

Stipulate that you are not responsible for consequential damages and/or that your liability is limited to the amount received pursuant to the contract. Or, if possible, limit damages to the highest monthly billing.

 

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