Business Contracts and Legal Risks

Topics: Risk management, Risk, Contract Pages: 6 (2094 words) Published: May 27, 2013
MGT 352
December 18, 2012
Final Paper2
Many companies today often don’t think about legal issues related to their business until they are hit with a lawsuit or decide they need to take legal action against someone else. The ramifications of a lawsuit as a plaintiff or a defendant can impact a company and even destroy a company and its reputation. This can happen if the company is not fully prepared on handling legal pitfalls that might come their way. Creating a system that defines and controls the company’s workflow is important in running a smooth and profitable business, as well as avoiding potential troubles with the law in the future. There are many risks that companies can be prepared for including structuring effective business contracts, avoiding lawsuits on business torts, minimizing product liability risks, avoiding employee lawsuits and avoiding risk in domestic and international sales transactions. Business Contracts

Contracts contain a common element which is a promise. A contract is a legal relationship that consists of the rights and duties of the agreeing parties growing out of promises. (Meiners, 2011). Contracts are important especially when an arrangement is more complex between two parties than just an exchange of money for goods. Contracts come in many forms and may not always be enforceable. Contracts can be in formal writing, oral discussions or inferred by the actions of the parties involved. A contract contains basic elements that gives the parties involved the confidence that exchanges will be enforced. These basic elements are an agreement, consideration, and legal capacity to contract, lawful subject matter, and genuine consent to the contract. Courts will not recognize contracts that violate the law. Business contracts play a vital role and can be damaging to a business if it is not properly written. Risks and opportunities for legal pitfalls become evident when new contracts are Final Paper3

being created. The contract writer can analyze a risk assessment before any complications can come of a contract. Risk Assessment:
Contracts should contain a goal that is identified. The scope of the agreement should address all the terms and conditions of the agreement. Contracts should be made to be enforceable in the court of law and the ability of the parties involved should be able to manage the risk involved in the contracts. World Wide Concepts Inc. needs to know the state laws that apply to the contract to avoid any legal pitfalls. Learning common mistakes that are made when drafting a contract could save a company time and potential court disasters. An article “Six Mistakes to Avoid When Drafting a Contract” (2012) states that being unprepared, not calling it a contract, being too general, using confusing wording, rushing through the drafting stage and not using an attorney are common mistakes a business can avoid by being aware of them when drafting a contract. A contract should not be written until all the facts are made known. An outline of all the relevant facts can help World Wide Concepts Inc. avoid legal pitfalls when drafting a contract. Making the document clear that it is a contract is important and can make a difference between an actual contract and a document that is just legally binding. Contracts need to be as specific as possible. Having specific clauses in regard to payments and related terms is necessary. Every small detail needs to be included. Sentences in a contract should be short and clear. Wording needs to be consistent throughout and numbers need to be spelled out as well as written in number form. Defining all terms that might not be common knowledge will help aide in avoid any confusion. Avoid rushing through the contract drafting process and not having an attorney review the final draft can be a potential legal pitfall for World Wide Concepts Inc. Final Paper...
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