Employee written contracts may lead to contract disputes later

Businesses use contracts for a variety of reasons. Even though some contracts may not seem risky, businesses need to be aware of how their contracts could harm their company if they are involved in a contract dispute.

Contract disputes can result in stressful arguments and litigation proceedings that could potentially harm the future of the company. That is why it is important for business owners to understand who can create a contract within their company and how to prevent contract disputes from happening.

Business owners enter into contracts all the time, so it is vital to understand the stipulations of the agreement and be aware of what issues may lead to a potential dispute. While many business owners like to manage their contracts on their own, many businesses also have employees that are able to create contracts on behalf of the company.

Whether or not the business intend for employees to enter into contracts on behalf of the company, it happens more often than owners may realize. This can lead to contract disputes and liability concerns for business owners as they may not be aware of the exact stipulations of the contract.

Business owners should consider if they want their employees to have actual authority to create contracts on behalf of the business. Even if employees do not, the company can still be liable for contracts created by employees who acted on behalf of the company.

This issue can involve a company's own employee entering into a contract with another individual or business or it can be the other way around. Many businesses may be confused over a new contract and may not understand the exact implications of what was signed.

That is why it is important to review all contracts and consult a business law attorney as necessary to reduce the company's liability and risk of being in a contract dispute.

Source: FindLaw, "Agents and Contracts: 5 Legal Considerations," Brett Snider, Sept. 24, 2013