Is Your Contract Protecting You And Your Business?

Ideally, business would be done with a handshake in which all parties would be aware of the terms of the agreement, where the parties recognize the duties owed to one another, and where the parties would understand their legal rights under any possible scenario that might affect the contract. In the real world, however, business is not done with a handshake-it is done with a contract. Sometimes, one side breaches that contract.

When a breach of contract matter is filed in the Pima County Superior Court, two of the most common themes in those suits are (1) the contract at issue was ambiguous, or open to more than one reasonable interpretation, or (2) there was no written contract at all. Under either scenario, the litigants in those lawsuits are both facing an uphill, and expensive, legal battle to enforce their contract, and receive the benefit of the bargain.

Your business’ contracts are the most important documents to the business. They govern your business’ relationships. They dictate how your business operates. Your contract is your protection from those unfortunate situations where a deal goes wrong. Even having a written contract, however, is no guarantee that you and your business will be protected, especially if your contract is poorly written.

In Arizona, a written contract should contain provisions to ensure maximum protection for you or your business in the event that the other side does not honor its part of the agreement. No two contracts will be the same, and the best contract is one specifically tailored to meet your business’ needs. There are certain essentials, however, which warrant inclusion in your contract such as:

Interest/Attorneys’ Fees/Legal Costs Provision—Arizona law allows the prevailing party in breach of contract disputes to seek reimbursement of its attorneys’ fees and legal costs. Including an attorneys’ fees provision in your contract will strengthen your claim for these expenses after the dispute is over. In addition, if you want interest to accrue on an outstanding balance owed to your business, your contract should include a provision stating the same.

Venue and Choice of Law Provision—This provision can allow you to use Arizona laws to govern the interpretation of your contract and set Pima County as the location for any legal action. This is a helpful provision if you do business across state lines.

Integration Clause—This clause states that the entire agreement is contained in the contract, and the clause’s effect is to limit the agreement between the parties to the four corners of the contract. In other words, if the terms are not articulated in the contract’s language, it is not part of the deal between the parties, and should not be considered in the dispute.

This list is by no means exhaustive of the many protections you should have in your business’ contract. The point is that an effective contract is geared to protect you and your business in any scenario. This is done by ensuring that there are no misunderstandings or misinterpretations of all parties’ rights and obligations under the agreement. Having a properly drafted contract can help you avoid the costly scenario of litigating an ambiguous contract, and will allow you to focus on what is really important: your business.