Top 5 Common Contract Mistakes to Avoid
You may discover that establishing a contract is a challenging activity that calls for certain crucial phrases, provisions, legal requirements, and eventually, client consent.
When your business's success and reputation are at stake, it's critical to correctly draft a contract that outlines important provisions, accounts for potential issues, and establishes a solid foundation.
When drafting your next independent contractor agreement, be sure to avoid these five typical contract mistakes.
Contracts are an important part of starting a new project. They provide legal protection, discuss services to be performed, and include payment terms and conditions. If you’re new to the process, you may find that drafting a contract is a complicated task, requiring specific key terms, provisions, legal obligations, and ultimately, client agreement.
As a solo-business owner, a simple contract mistake can end up costing you valuable time and money. With your business and reputation on the line, it’s important to carefully negotiate a contract that includes critical terms, safeguards against potential issues, and establishes a solid foundational client relationship.
Here are five common contract mistakes to avoid when writing your next independent contractor agreement.
1. Vague Descriptions
In a contract, it’s important to outline the services you will provide as precisely as possible. For example, “independent contractor will perform consulting services for client” leaves far too much open to interpretation and disagreement on the actual scope of the project.
When drafting a contract, include details and being specific. Don’t assume that particulars will be mutually understood—if something is not specified in your contract, your client is not legally accountable for it.
Try it: SOW Template (Scope of Work) for Project Management
2. Not Enough Information
Creating a contract without estimations can be difficult, particularly if you use an hourly billing rate or plan to rely on outside vendors who may affect your timeframe. However, it’s important to go into an agreement with as much known information as possible.
At the very least, scope, responsibilities, and payment terms should be discussed, clearly defined, and written down. Any timeline estimations should be based on careful calculations and data, if possible.
Dig deeper: Do I Need an Independent Contractor Agreement for Consulting?
3. Ambiguous or Confusing Language
Just because a contract is a legally binding document doesn’t mean it has to be filled with “legalese” that is hard to understand. Avoid using highly technical industry terms and jargon that your client may not be familiar with.
Likewise, if your client wishes to include a clause that you’re not familiar with, work with them to simplify the request. A contract’s language should be thorough, but also simple to understand.
Check out: How to Bid on Consulting Projects and Win
4. Using a Generic Template
When drafting your own contracts, referencing a template can provide a helpful guide and outline. However, using templates as a substitute for a custom contract can be risky. Templates may omit sections or verbiage that are particular to your field or project.
Templates may also fail to meet the requirements of your state’s contract laws. When using a contract template as a reference guide, be sure to add additional information to customize it to your needs.
Learn more: How to Write an Independent Contractor Agreement
5. Not Consulting an Attorney
Many independent professionals choose to hire an attorney to draft their contracts. This helps to ensure that the contracts are properly written, include all necessary information, and fully protect both parties.
Should you choose to draft your own contract, or if your client provides a contract, it is highly advisable to have an attorney review the contract and terms before signing.
Up next: Consulting Proposal Template and Guide
Consultants who run their business through MBO Partners receive help reviewing contracts. Don’t hesitate to reach out if you have questions about creating a contract for your next project.
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