Running a business is all about building strong relationships. When it comes to buying or selling goods or services to other businesses (B2B), a written agreement is essential. Think of it like a clear roadmap that outlines what each party expects from the other. But just like any map, a poorly written agreement can lead to confusion and detours.
A good B2B agreement has clear instructions for each deal, so everyone gets what they expect. It considers a contractual risk matrix and accounts for the levels of risk each party is willing to accept or if not pay or be liable for.
We will show common mistakes businesses can make when writing these agreements, and how to fix them early-on. By following these tips, you can help write clear agreements that make sure everyone gets to the right stuff. This keeps things easy and avoids any problems.
Common Mistakes and How to Avoid Them:
Shaking hands on a deal is great, but when it comes to B2B agreements, a written contract is your best friend. Think of it like a clear roadmap for your business relationship, ensuring everyone is on the same page. Here’s how to avoid some common pitfalls that can lead to detours and frustration:
1. Leaving Room for Misunderstandings
Simple misunderstandings can lead to greater damages later. Things that seem so normal or small now, may become significant matters or details later. Almost 80% of the problems in a business contract can be eliminated if it clears out everything and leaves no room for misunderstanding.
These are the most important notes you should keep:
- Clear Language: Skip the fancy legal terminology and use clear, everyday words that everyone involved can understand.
- Defined Terms: If you have specific terms you use in your business (e.g., “custom widget”), simply explain what they mean in the agreement.
Example: Imagine ordering a desk but needing to know its size or color! Don’t let your B2B agreement be like that! Be specific about what you’re buying or selling to avoid any confusion down the line. Specify the color, the size of the desk, the quality of the desk and everything that relates to this matter. You should mention all those in the contract, that’s the best way to stay out of any misunderstanding.
Here at Roland & Co. we can be a great solution for you. We have experience in writing both complex and simple contracts for almost 10 years and at the highest level (we’ve acted for FTSE 100 and global companies!). Clear language is the most important part of any business contract. Otherwise, later anything can happen from damaged business relationships to unforeseen financial losses.
2. Missing Essential Pieces
A strong B2B agreement needs essential elements to function, just like a recipe that needs flour and sugar! Don’t forget to include details like:
- Scope of Work: What goods or services are being provided? Be specific about what’s included (and not included).
- Pricing: How much will this cost? Outline payment terms clearly (e.g., upfront payment, installments).
- Termination Clause: Under what circumstances can the agreement be ended? Are there any early termination fees? This protects both parties.
Imagine a clothing shop hiring a company to build its website. They agree on a design and features but forget to talk about what happens if they want to quit the project early.
This can cause problems for both sides:
- Clothing Shop: They might not know what to pay if they quit early. They could end up paying for the whole website even if it’s not finished, or they might have to go to court to fight the website company over the fees.
- Website Company: They might have already spent a lot of time and money working on the website. If the shop quits early, the company might lose money they were expecting to earn.
A clear contract with a “termination clause” would have helped avoid this mess! Even though there won’t be any jail time, it can hurt both businesses: damage their friendship and cause financial losses.
Roland & Co. never forgets to put any essential piece together for a contract, we have a checklist if anything goes missing or not.
3. Forgetting the Fine Print (A Must Need)
- Mistake: Missing the final flourish, like forgetting to sign a painting!
- Solution: Double-check these details:
- Correct Information: Make sure both parties’ legal names and addresses are accurate.
- Authorized Signatures: Make sure the right people from each business sign the agreement, like the boss (CEO, Director) or someone they trust to make big decisions (authorised signatory).
- Attachments: If there are additional documents (like product specs), list them in the contract to avoid confusion.
- Tip: Include a signature block specifying who needs to sign for each party.
Real-Life Example:
Imagine this: a construction company is building a house. They talk to a supplier about the bricks they need – how many, what kind, and how much they’ll cost. But they never get a written agreement, like a signed contract.
Later, when the bricks arrive, they’re all wrong! They’re the incorrect size or quality. This slows down the entire building project and costs the construction company a lot of extra money.
- Showing what they ordered: It’s hard to prove what kind of bricks they actually talked about with the supplier.
- Getting what they paid for: Without a contract, it’s difficult to make the supplier give them the right bricks or get their money back.
This is why contracts are important, especially in business deals. A contract is like a clear plan that shows what each side agrees to do. If the construction company had a contract, they could easily show it to the supplier and get the correct bricks delivered.
4. Leaving Things Fuzzy (No Separate Section Needed)
- Mistake: Don’t be vague!
- Solution: Be specific about what you’re buying or selling:
- For Goods: Include details like materials, quantities, and quality standards.
- For Services: Outline deliverables, timelines, and any performance benchmarks.
Real-life Scenario
Imagine a clothing company hiring a social media expert to help them sell more clothes online. They agree to work together but forget to write down exactly what the expert will do.
This can lead to problems for both sides:
- Unclear Goals: The clothing company might want professional posts every day. On the other hand, the professional may have planned to post once a week. This can cause arguments between the parties.
- Hard to See Progress: Without clear goals, the clothing company can’t tell if the expert’s work is helping them sell more clothes. The expert might have a hard time proving they’re doing a good job.
5. Ignoring Bumps in the Road (Section: Dispute Resolution)
- Mistake: No plan for disagreements, leading to expensive arguments!
- Solution: A good B2B agreement should also have a plan for if things go wrong. This plan called a “dispute resolution clause,” says how the businesses will try to fix any disagreements.
- Example: The agreement could say that both businesses will try to talk things out first before going to court. This can save everyone time and money.
Real-Life Scenario
You can create a clear B2B agreement yourself, even though a lawyer/solicitor can make it super strong legally. Here’s what can happen if you forget some key things:
Imagine a factory hires a computer whiz to build a system to track their parts. They agree on a price and some features but forget to write down every single thing the system should do.
This can lead to trouble later:
- Arguments about Features: Maybe the factory wanted the system to track expiration dates, but the computer whiz didn’t build that part in. This can cause arguments.
- Unhappy Factory: If the system doesn’t do everything the factory needs, they might be mad and not want to pay the full price.
A good contract with all the features written down would prevent this mess!
Missing Dispute Resolution Clause:
The problem is compounded by the absence of a suitable dispute resolution clause in the B2B agreement. Without a designated process for addressing disagreements:
- Stalemate and Delays: Both parties are stuck in a stalemate, unsure how to proceed. This can lead to project delays and lost productivity.
- Increased Costs: If the disagreement isn’t resolved amicably, it could escalate to a formal legal battle. Litigation can be expensive and time-consuming for both companies.
If the agreement had included a dispute resolution clause, it could have looked like this:
“In the event of a disagreement regarding the deliverables or functionality of the software, both parties agree to attempt to resolve the issue through good faith negotiation. If a resolution cannot be reached within 30 days, the disagreement shall be submitted to binding arbitration…”
Roland & Co never misses to include these essentials.
Benefits of a Great B2B Contract
- Less Confusion: Everyone knows what they’re supposed to do, so there’s less arguing and more teamwork.
- Protects You: The contract spells out your rights and what the other business owes you, so you’re covered if things go wrong.
- Solves Problems Faster: If there’s a disagreement, the contract has a plan for how to fix it quickly and cheaply.
- Stronger Friendships: A fair contract builds trust so you can work well together for a long time.
Conclusion
Getting a lawyer/solicitor is great for a super strong contract, but these tips can help you create a clear and effective agreement yourself. Think of it as an insurance policy that saves you headaches and money down the road!\
You may think that you can do the writing yourself, so it must be easy. Then most people hire someone from around the family who knows a bit of these contracts. That’s the mistake everyone does. Always hire the best and most experienced lawyers before writing the contract.
Roland & Co is a well experienced law firm in this sector, so you can contact them to stay out of any future disputes.
