Small Business Tip of the Day: Creating Contracts

I’ll start this post off by saying I am not a lawyer, and none of what I put anywhere on my site should be construed as legal advice.

Today’s topic, however, is one that involves legally binding agreements. So let’s just say the following are my opinions on the basics of creating contracts for your small business.

As a small business owner, if you aren’t using written contracts yet, you should be. Although verbal agreements are valid, enforcing them gets tricky when the parties disagree over what was previously discussed and have nothing in writing to back either side. Therefore, written contracts are best for everyone involved.


If you follow a few basic guidelines, your written contracts can become another business tool in your skill set.

  1. Get all the details down in writing. Even something as seemingly obvious as who is providing the service and who is receiving it needs to be spelled out. It’s most important to include: the date the contract takes effect, the names (and roles) of the parties involved, the exact products or services included in the deal, any and all deadlines for completion of the contract terms, and the payment amounts and due dates.

  2. Don’t allow legal jargon to complicate your contract or intimidate you not to create one in the first place. In fact, you can create a perfectly legal contract without any legalese. My best advice is to keep your wording as simple as possible and avoid any ambiguity if possible. A clear, simple contract makes it easier to spot any potential mistakes and allows either party to edit any risky or uncomfortable language.

  3. Include an escape route.  Name the specific terms under which you or the other party is allowed to end the contract. Include how to give notice of contract termination to the other party and how far in advance the notice needs to be.

Keep in mind that while it’s a good idea to create your contract in a professional format, any kind of agreement in writing is legally binding. (I once rented a condo from a woman who worked in the legal system—she drew up our rental agreement on the back of a piece of scratch paper!!)

Also, don’t forget that all parties involved in the agreement need to sign the contract. If a representative from your company signs, be sure he or she has the authority to act on behalf of the company.

I have seen and heard a few contract horror stories in my career. Based on your own experience, what contract tips do you always practice?