The Value of Contracts and the Need for Legal Counsel in Every Business
Most businesses execute contracts for services, products, supplies, employees, etc. These agreements need to be carefully drafted and reviewed by business attorneys to ensure the intended terms of the contract are met.
Legal departments need to be clear on their transformation priorities and align them with those of the broader business to be effective. It will require process management, technology, and new sourcing strategies.
Legally Enforceable Agreements
For any business, contracts help formalize relationships and set out the terms of those relationships. It helps prevent misunderstandings and allows for legal action if any issues arise.
However, contracts must meet certain essential elements to be enforceable in court. These include an offer and acceptance, consideration, intention to create legal relations, authority and capacity, and certainty.
During the contract process, companies can maximize their value by negotiating contracts that work in their favor. These are the types of arrangements that can increase revenue and drive growth. Tracking contract data like total contract value can also help businesses understand their customer portfolio and see patterns that could impact future growth. This information can also inform their sales and marketing strategies. Contracts can also serve as a brand asset and show that the company cares about its customer relationship.
Minimize Risk
A contract can protect you from miscommunication, misunderstanding, or disagreement between parties. However, despite the importance of contracts in a business, it’s never possible to eliminate all risks – especially when dealing with complicated agreements.
The most effective way to minimize contractual risk is by engaging a Linden Law Partners attorney to draft all critical transactions, contracts, and routine agreements, such as confidentiality or employment agreements. By seeking the assistance of a lawyer, you can confidently establish a legal entity, effectively mitigating any potential risks that may arise.
Another great strategy is to keep tabs on regulatory news via industry and government compliance blogs and websites; this can alert you to common pitfalls that can be avoided with careful planning. Finally, a digital self-service contract management system with a clause library can streamline contract preparation and improve negotiation efficiency.
Document Your Relationships
Contracts are at the heart of most professional relationships. Your dry cleaner, mechanic, and pet sitter all operate based on contracts defining their services’ terms. Although arrangements can be informal and verbal, for an agreement to be enforceable by law, certain elements must be fulfilled: capacity, offer, consideration, and intention.
A clear understanding of these elements is critical when reviewing and managing contracts for your business. A robust contract management process also helps ensure that all relevant parties are included and the document addresses what will happen in case of a breach or dispute. For example, incorporating non-disclosure and confidentiality clauses can help keep your most important information safe from third parties. It is an essential piece of contract law that many small businesses overlook.
Increase Revenue
Legal teams are typically required to review a high volume of contracts. But if they spend their time keeping tabs on low-value contract data, it can be challenging to prioritize and focus on high-risk or higher-value contracts.
Increasing revenue is a crucial goal during contract negotiations. For example, rising prices may incentivize providers to pass on additional fees during a renewal negotiation with clients. To avoid resistance, a strong case for why those fees are justified must be made.
Understanding TCV helps businesses uncover trends, patterns, and opportunities based on the value of contracts secured over time. This information can help enterprises better evaluate their customer portfolio and identify new opportunities to attract more customers. It can also guide pricing strategy and determine appropriate discounts for incoming business.
Save Money
Using a lawyer might cost money upfront, but a good lawyer can save your business a lot in legal fees and other expenses. Contract negotiations reduce unanticipated charges from suppliers and protect your company against bad deals.
Taking a strategic approach to contract negotiation can also help your business save money in other ways. For example, a leading contract management platform allows you to track the total value of contracts and identify those with the highest value.
You can then use this information to shape your business strategy and attract customers with high contract values. It helps prevent contract value erosion, an estimated revenue loss your business expects to earn from a contractual agreement.
