What Kind Of Contract Does A Small Business Need?

Other than good insurance, a small business also needs a good form contract. This is not the place to use one your brother-in-law had the lawyer write 10 years ago for his online auto part store and you’re building high-end custom computers.

Your terms and conditions should be geared toward your business and its specific risks. This is a good place to spend a few of those precious start-up bucks on a lawyer instead of hoping you found the right contract online.

Some contracts are required to be in writing, such as anything to do with land, contracts for goods worth $500 or more, and contracts for services that cannot be performed in a year. Sometimes valid contracts can be formed by exchange of email. They can be on index cards or cocktail napkins.

A contract doesn't have to have much to be enforceable. It has to have the proper legal names of the parties, be signed by both parties and have a method for determining the price. A contract should be specific enough that a third person could determine what the parties agreed to do.

A good contract, however, will contemplate where the business deal can go bad, and address these issues. It allocates the risks between the parties, so you need to know what your worst-case scenario will cost you. They will include provisions on how the contract can be terminated, whether late fees and attorney’s fees can be charged.