Why every growing business needs sound contracts

A growing business signs agreements almost daily. Clear terms are what make them enforceable when something goes wrong.

A growing business enters into contracts almost every day.

Contracts may exist between a business and its customers, suppliers, employees, consultants, landlords, investors and business partners. Yet many businesses pay attention to contracts only when something goes wrong.

That approach can create unnecessary risk.

Contracts establish expectations

A properly drafted contract can help parties understand their respective responsibilities.

A business owner should know:

what the other party is required to provide;

what the business must provide;

when payment is due;

when performance must occur;

what happens if there is a delay;

how the agreement can be terminated;

how confidential information will be treated;

how disputes will be addressed.

The precise terms will depend on the transaction.

Do not copy a contract blindly

A contract downloaded from the internet or borrowed from another business may not properly reflect the transaction being undertaken.

Two businesses can operate in the same industry but have completely different contractual requirements.

A contract should therefore reflect the actual relationship between the parties.

Contracts are part of risk management

For a growing business, a contract can be an important risk-management tool.

It can clarify expectations before a disagreement arises.

It can also provide a framework for dealing with problems when they occur.

Aya Lex & Partners PRUC business client profile describes a growing business owner who values clarity and reliable legal support in navigating contracts, compliance and potential legal risks.

Corporate governance and contracts

Contracts should also form part of a wider governance system.

A business should know who has authority to negotiate and sign agreements and whether certain transactions require additional approval.

Corporate governance guidance in Ghana recognises directors’ responsibilities to act in good faith and in the interests of the company, among other duties.

A contract should not be treated as a document to sign simply because the other party has prepared it.

Understand the agreement before you commit the business to it.

For significant transactions, obtaining legal advice can help identify important obligations, risks and protections before the agreement is concluded.

This article is for general information and does not constitute legal advice.