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Mitigate Risks When Drafting Business Contracts With These 10 Tips



Give one tip to best mitigate risks when drafting business contracts?


To help you best mitigate risks when drafting business contracts, we asked lawyers, CEOs, and business leaders this question for their best insights. From including a terminating clause in your contract to securing approvals with e-signatures, there are several tips that should help you take the right steps to mitigate the risks that come with drafting business contracts.

Here are 10 tips these leaders follow to mitigate risks when drafting their business contracts:

  • Include a Termination Clause

  • Purchase an Insurance Policy That Covers Losses Due to Contract Errors

  • Add a Disclaimer Section

  • Use a Template to Guide Your Contract Writing

  • Check Spelling and Grammar Thoroughly

  • Have a Centralized Data Management Tool in Place

  • Create a Checklist of Things That Need to Be Included

  • Use Encryption to Protect Contract Data

  • Avoid the Legalese

  • Secure Approvals With E-Signatures


Include a Termination Clause

Make sure the contract has a termination clause, in case things go south. Having a clear clause outlining how to terminate a contract is an important risk mitigation strategy for both parties. It will help avoid any major disputes in the future. You of course will not want either party to be able to terminate frivolously, so be sure to indicate what conditions will allow termination along with an appropriate wind-down period that gives both parties enough time to prepare for the termination.

Matthew Ramirez, Founder, Paraphrase Tool




Purchase an Insurance Policy That Covers Losses Due to Contract Errors

Hire a lawyer. Yes, that’s obvious. But often there is limited capital: Which is more important to your business, a marketing or legal spend? While hiring competent counsel may be an unappetizing fixed cost it will nevertheless protect your business, and save money in the long run. A poorly drafted contract is likely to result in a lawsuit, which will at a minimum stifle growth. Outside of hiring counsel, purchase an insurance policy that covers losses arising from errors in contracts or general contractual liability. Make sure that policy covers costs of defense (attorneys’ fees) and indemnifies you from a judgment.

Robert Reder, Attorney, Blythe Grace PLLC


Add a Disclaimer Section

One way to mitigate risk in business contracts is to add a disclaimer section. A disclaimer section allows you to clearly communicate to the other party what you are and are not responsible for, as well as any limitations on your liability. This can be done by adding a clause or detailed paragraph which states that one party does not accept responsibility for any harm caused by the other party's failure to perform under the contract, or any other act or omission by the other party that would not otherwise be covered by the terms of the contract. This can help to prevent a situation where one party tries to hold another responsible for damage caused by their own negligence or failure to perform under the contract.

Tiffany Homan, COO, Texas Divorce Laws


Use a Template to Guide Your Contract Writing

Avoid vague language and stick to the specifics at hand. If you are drafting business contracts without the help of a lawyer, chances are you are lacking in some degree of contract writing. As a general rule of thumb, avoid writing in a general way. Go online and download templates of other business contracts that you can cannibalize and make your own. Without hiring a professional, this is your best chance to do it right the first time.

Patrick Robinson, Founder & CEO, Paskho


Check Spelling and Grammar Thoroughly

Always double and then triple check all grammar and spelling. A single error especially when it comes to the precise spelling of any important names or businesses could potentially void the entire contract if everything isn’t written and filed correctly. At the very least, have someone help you proofread the contracts ahead of time.

Michael Burghoffer, CEO, PicoSolutions


Have a Centralized Data Management Tool in Place

In drafting business contracts, ensure you have a centralized data management tool to mitigate risks. Some of the issues in business contracts could be missing a deliverable, milestone or deadline. Use the centralized tool to manage key dates, with an integrated system for email reminders to all key decision-makers to ensure there is efficiency. Consistency and efficiency can also be enhanced with this mitigation strategy.

yongming Song, CEO, Imgkits- Photo Editor




Create a Checklist of Things That Need to Be Included

Drafting a business contract can be a complex and time-consuming process. To mitigate risks, it is helpful to have a checklist of the important aspects that should be included in the contract. This will help ensure that all the relevant issues are covered. It is also helpful to have a checklist of checks that should be made before signing the contract. This will help ensure that all the important details are correct and that all the necessary signatures have been collected. Having a checklist of these important steps will help to mitigate risks and ensure that the contract is drafted and signed in a timely and effective manner.

Luciano Colos, CEO, PitchGrade




Use Encryption to Protect Contract Data

Using encryption to protect contract data is a simple way to mitigate risk when drafting. Keeping document data safe from unauthorized access is critical. Good contract management software encrypts information at rest and in transit to offer the best protection. That way, only those meant to see the document can.

Chris Coote, Founder & CEO, California Honey Vapes


Avoid the Legalese

Fanciful terms are an unnecessary part of business contracts. A good contract can mitigate risks by clearly expressing the fundamental terms of the contract in plain English. You can express rights and obligations, allocate risk, and plan for disagreements in a clear and concise form without needing a dictionary. The only time you should use legalese is when using "magic words" with established meaning.

Derek Colvin, Attorney, Waldrop & Colvin


Secure Approvals With E-Signatures

One of the best ways to mitigate risk when drafting business contracts is to secure approvals with e-signatures. This helps to ensure that all parties have read and agree to the terms of the contract, and that the contract is legally binding. E-signatures also help to reduce the chances of errors, as all parties can easily review the contract before signing it. In addition, e-signatures can help to speed up the contract approval process, as all parties can sign the contract electronically without having to print and sign it manually. Overall, using e-signatures is a simple but effective way to reduce risk when drafting business contracts.

Ludovic Chung-Sao, Lead Engineer & Founder, Zen Soundproof