Hardwood Floors April/May 2026

BUSINESS BEST PRACTICES

LEGAL

A PRACTICAL GUIDE FOR BUSINESSES MANAGING RISK AND LIABILITY IN YOUR CONTRACTS:

PHOTOS COURTESY OF ADOBESTOCK ©

Contracts are not only the foundation of business relationships, they also are a key tool for managing risk. Whether you are an owner, manager, or representative of a company, understanding how to use contracts to allocate and control risk is essential. This article explains important contract clauses that help manage risk and offers practical tips for reviewing and negotiating contracts.

YOUR CONTRACT VS. THEIR CONTRACT: WHOSE TERMS APPLY? When starting a business relationship, you may be presented with the other party’s contract, or you may have your own standard contract. It is important to remember that each party’s contract usually is written to favor their own interests. Before signing, review the business terms carefully to ensure they are accurate and include all negotiated items. Under contract law, anything you and the other party agree on during negotiations, whether in person, by phone, or in writing, must be included in the written contract. If it is not in the contract, usually it will not be binding legally or enforceable later. Also, look for clauses that assign risk. These are provisions where one party agrees to take responsibility for certain risks, losses, or obligations. Such clauses clarify which party will bear the financial or legal consequences if specific events occur, such as damage to products or failure to provide a service.

KEY CONTRACT CLAUSES FOR MANAGING RISK INDEMNIFICATION What is it? Indemnification

provisions mean that one party agrees to cover certain losses, damages, or costs that the other party might face because of specific events or actions. In simple terms, it is a promise to protect the other party from certain risks or liabilities. Indemnification clauses often are called “hold harmless” clauses, ensuring that a party is not harmed by the acts of the other party financially.

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