A well-drafted contract does more than outline what each party agrees to do. It also sets expectations for what happens when things do not go as planned, which is a crucial consideration for every business owner before signing on the dotted line.
Below are three provisions that may be worth a closer look the next time you review or draft a business agreement.
Dispute resolution clauses
A dispute resolution clause spells out the process both parties will follow if a conflict arises. Without one, you could find yourself headed straight to a courtroom, which often means higher costs and longer timelines.
In Texas, arbitration is one of the most common forms of alternative dispute resolution. Per state law, a written agreement to arbitrate is valid as long as it covers a controversy that exists at the time of the agreement or arises afterward.
Termination clauses
A termination clause outlines the conditions under which either party can end the contract to ensure there are no surprises down the road. In Texas, a party that ends a contract without following its terms could face a breach of contract claim, which may result in compensatory damages or other legal consequences.
A strong termination clause typically covers details such as how much notice one party must give before ending the agreement or what qualifies as grounds for early termination, such as a material breach.
Think of this provision as an exit strategy built into the agreement itself. It helps both sides understand their rights and responsibilities if the relationship needs to come to an end.
Payment terms
It might seem straightforward, but unclear payment language is one of the most common sources of contract disputes among Texas businesses. A payment terms clause goes beyond stating how much one party owes, it establishes when payments are due, how they should be remitted and what happens if a payment arrives late.
For example, you might agree that invoices are due within 30 days of receipt. But if the contract does not specify a late fee or outline the consequences of nonpayment, enforcing that timeline becomes much harder.