You already know there are some good reasons to put a contract in place with your suppliers, so let’s review the four steps that we typically go through to finalize a contract. If you are doing something critical or expensive, consider hiring an attorney to help you through the contract process and make sure that you avoid common pitfalls.
1. Drafting the contract
The actual writing of an agreement; putting what you mean down on paper. There are many basic templates on the web for all sorts of deals. During the contract drafting stage, you clarify the products or services you are receiving and the standards that you expect them to adhere to.
The draft should be clear if read by a disinterested observer (this can be harder than it sounds!). When finished, share it with your supplier (or have them share it with you if they took the first turn).
2. Contract negotiation
Most likely, you and your supplier won’t agree on everything in the draft. Possibly, you left some items unresolved, you need clarification or you want something better from your point of view.
You are engaged in classic negotiations as you strive for agreement (actually, you were in negotiations from the moment you contacted your supplier…but that’s the topic of another article!)
Discuss your differences, find areas of agreement, adjust your contract and repeat until you and your supplier are willing to do business with the deal that you’ve agreed to. Depending on the complexity of the deal and how far apart you started, this back-and-forth may need to go through several cycles.
3. Reviewing the contract
When you’ve reached agreement and you think that you have the deal documented appropriately, you’ll need to review the contract for completeness.
This is a good time to have your accountant or attorney take a look if it’s a large or complicated engagement and they haven’t been involved yet. Also, there may be others you should talk to prior to agreeing to a deal.
4. Contract execution
Executing the contract consists of 2 parts. The first is signing the deal, which makes the terms and conditions of that contract legally binding. The second is delivering the services and payments in accordance with the agreed-upon terms.
If it’s a good deal and you are satisfied with the services, you can sign a new contract to buy more! If you aren’t completely satisfied and need to adjust something, then you can return to drafting and start documenting and negotiating a new contract.
The contract process
The four steps outlined in this quick guide help ensure everyone is on the same page during the contract process. Get more tips to protect your business at Capital One Business Deals.
Special thanks to Eric Lowell for his contributions to this article.