Negotiating Business Contracts: Tips for Small Business Owners in NJ
Small business owners will enter numerous contracts during their time in operation. To protect themselves and facilitate smoother relationships with clients, vendors, and other partners, owners should familiarize themselves with best practices for negotiating contracts.
Understand the Basics of a Business Contract
First, small business owners should familiarize themselves with the basics of business contracts, including what can create a legally binding contract: offer, acceptance, and consideration. Knowing how to make a contract can help business owners avoid inadvertently entering a binding agreement.
Small businesses may enter various types of agreements, such as vendor contracts, purchase agreements, master services agreements, independent contractor agreements, non-disclosure agreements, and joint venture agreements. However, like other states, New Jersey has various laws that can affect or restrict business contract terms, such as commercial or consumer protection laws.
Do Your Homework Before Negotiations
Before entering contract negotiations, small business owners should arm themselves with as much information as possible. For example, business owners should research the other party to learn about their track record and reputation – do they have a history of not performing their contractual obligations? Businesses should also take time for introspection to understand their needs and objectives for a contract. Understanding your company’s goals can help you identify what terms you cannot negotiate and how much you can negotiate on other terms.
Key Terms to Watch for and Negotiate
Critical terms to pay close attention to during business contract negotiations include:
Payment Terms – A contract’s payment terms will govern matters such as the timeline for payment and the procedures that go into effect for late payment.
Termination Clauses – Business owners should carefully review termination clauses to understand when parties can terminate the contract and their obligations before and after termination.
Liability Allocation and Indemnification Rights – Contracts can allocate liability risk between the parties and entitle a party to seek indemnification if they face liability for a risk allocated to the other party.
Dispute Resolution Provisions – Businesses frequently include dispute resolution provisions requiring parties to submit their disputes to mediation or arbitration to promote a swift and confidential resolution.
Venue and Applicable Law – Contracts can include choice of forum or choice of law clauses that require parties to bring lawsuits in a specific state or court and require the forum to apply a particular state’s laws.
Don’t Skip Legal Review
Small business owners should always have an experienced attorney review proposed agreements before signing them. A lawyer can identify clauses unfavorable to your interest or terms with vague language that could lead to legal disputes. A lawyer can also make sure the contract follows applicable laws so you can enforce it in court if needed. Even if you drafted the contract, having an attorney review it before you present it to the other party can help you avoid costly mistakes.
Build Trust But Use Clear Language
A contract negotiation allows your business and the other party to build mutual trust. You should not view a negotiation as a competition to get the most out of the deal. Instead, a contract negotiation should build the foundation of a mutually beneficial working relationship.
However, even though you and the other party may begin to trust one another, you can always protect yourself by making sure your contracts contain clear language so everyone understands their rights and obligations. Vague or legalistic language can lead to confusion or disputes over rights and duties. Furthermore, avoid using contract templates you might find online unless you thoroughly customize them to your needs and goals and have an experienced New Jersey attorney review the final draft.
Contact a Business Law Attorney Today
When your small business needs to negotiate a contract, hiring experienced legal counsel can help you protect your company’s interests. Contact The Cassidy Law Firm LLC today for an initial consultation with a New Jersey business law attorney to learn more about best practices for negotiating business contracts.