Key Contract Provisions Every Small Business Owner Must Know (Full Transcript)

Speaker 1: Every small business owner should be concerned about the provisions that are in their written contracts. There are some provisions that are considered to be boilerplate, but they're very important provisions. These are the provisions that don't just govern the relationship between the contracting parties, but also govern what happens in interpreting the contract, or what happens if the contract needs to be amended, or what happens if the contract is breached. So some of the provisions that are important in a contract deal with just that. What happens if there's a breach or a violation of the contract? First of all, one needs to determine whether the party, however the party is going to resolve a dispute, or a breach, or a violation. Are they going to litigate, which means are they going to go to court and have a trial about this? Are they going to mediate, which means are they going to sit down with a neutral third party, where that neutral third party helps them to reach an agreement, a consensual agreement? Or are they going to arbitrate, which means that they're not going to go to court, but there is going to be a judge of sorts, or a panel of judges, who will hear the dispute and will make a decision as to what the outcome should be to resolve that dispute. So that dispute resolution part of a contract is something that's very important. Furthermore, in the event of a breach or a violation, the parties need to determine whether they're going to be entitled to damages, which means how much money are they going to get if there's been a breach or a violation. Sometimes it's really hard to determine what the damages are during the course of the dispute resolution, and you may need to hire experts. One of the things that you can do is have a provision in the agreement that deals with what's called liquidated damages. Liquidated damages is an agreement ahead of time as to what the value of a breach may be, so that the parties don't have to argue not only about was there a breach and who was responsible for the breach, but they won't have to argue about how much money are they entitled to as a result of that breach. So those are some important provisions. Other important provisions are to state in the agreement that the written agreement is the complete agreement, that there aren't any prior agreements, there are no other representations being relied upon. Everything that's being agreed upon is right there on the four corners of the pieces of paper. What's important in today's day and age of electronic communications between email and tweets and instant messaging and other types of messaging that happens randomly and quickly is to make sure that you don't enter into some sort of an agreement by virtue of those types of electronic communications unless you really intend to do so. So an important provision in a contract is to have a statement saying that this agreement is the written agreement on the four corners of the paper are the complete terms of the agreement.