Top 5 Common Contract Mistakes in Salt Lake City, Utah

Contracts are the foundation of every business transaction. A small contract mistake when you’re entering into a business deal or signing an employment contract can lead to costly litigation. In my years of practice as a contract attorney in Salt Lake City, I’ve seen some common errors that can be easily avoided with the right guidance. Here are the top five mistakes to watch out for when entering into a contract in Utah.

Failing to specify which State’s Laws govern the contract (choice of law)

One of the first things I advise clients to pay attention to is to decide which state law governs their contract. This is called a “choice of law” clause (also known as governing law clause). In contract law, a choice of law clause is when the parties agree that if any issues come up with the contract, they will be resolved based on the laws of the chosen jurisdiction.

Always be sure to clarify which state’s laws apply to your agreement. It can make a world of difference in how your contract is enforced.

Not specifying the Venue for Disputes (choice of venue clause)

The choice of venue clause determines the specific forum and location where any legal proceedings, including litigation and   arbitration , related to the contract can be initiated.

Be sure to include a “venue” clause in your contracts to designate a location and court of law for resolving any legal disputes. It can save you from having to travel across the country or hire out-of-state attorneys.

Failure to Include Clear Liquidated Damages

When you enter into a contract, it’s tempting to include a penalty for late performance or a breach of contract. But you need to be careful about how you structure that clause. If the amount you’re asking for is too excessive, a court may find it unenforceable. I’ve seen cases where clients try to impose hefty penalties, like asking for $20,000 in damages for a $15,000 transaction. Courts may not enforce that clause because it could be considered a “penalty” rather than a fair estimate of damages.

Make sure your liquidated damages clause is reasonable and based on a realistic estimation of potential harm. You want it to protect you, not backfire.

Not Getting Everything in Writing

In Utah, as in many other states, if something’s important enough to be in your contract, it needs to be in writing. Verbal agreements are often difficult to enforce. In fact, many contracts specifically exclude anything not written in the contract itself.

Whenever you’re negotiating terms, especially unique or non-standard provisions, always make sure to get it in writing. It’s the best way to avoid misunderstandings.

Signing Without Understanding Personal Liability

Many business owners make the mistake of signing contracts without realizing they are personally liable for the terms. This is especially true for people running LLCs or corporations. If you sign a contract using your personal name, even if you’re acting on behalf of your company, you could be personally on the hook for performance or damages.

When signing on behalf of a business, always use your title, such as “John Doe, President of XYZ LLC.” This helps make it clear that you’re acting in a corporate capacity and not as an individual.

Contact Watts Law Salt Lake City Business Attorneys today

At Watts Law, I understand that not every business can afford full-time legal counsel, which is why I offer flexible services for the Salt Lake City business community. Small contract mistakes can cost you in ways you might not anticipate. If you need help drafting or reviewing a contract,   schedule a meeting with me   at (801) 630-8309.