When you contract with a business, sometimes the compact you sign is fair to you, spelling out reasonable and clear terms for you and the business. But some businesses or entrepreneurs draft contracts that contain substantial flaws. A court may even decide to free a person from a contract on the grounds the contract is unfair or badly constructed.
Forbes explains that some businesses draft their contracts very poorly. A signatory to a contract may find the agreement is unclear in its provisions. Some contracts omit key information. Badly drafted contracts can be a big problem for companies since courts may release signatories from ambiguous and unclear contracts. Some people lose asset ownership and possibly a large amount of money due to faulty contracts.
Contracts should also follow the law. A person acquiring startup money needs to follow disclosure and notice requirements. Franchise agreements need to comply with state regulations. A contract that does not follow state and federal regulations may become legally unenforceable and even invite civil litigation, fines, and criminal charges.
Even if your contract complies with state and federal law, if those laws have changed, you should update your contract to reflect those changes. Some areas of law, like real estate, do not change very often, so contracts made 10 years ago may not require modification. Tax regulations, on the other hand, change regularly. A contract that involves substantial compliance with tax regulations will need alterations when needed.
A business can also ruin a contract by making it unfair. Companies naturally work to make sure a contract serves their interests, but making a contract so one sided that a client or worker incurs unfair risk and cannot hold the company responsible for any failure runs the risk of taking things too far. A court may decide the contract is unconscionable and throw it out. Business regulators may also investigate the company if they feel the company contracts are unfair.