Contracts are the foundation of many business relationships. Yet, too often, business owners enter into agreements that lack the specificity and clarity necessary to avoid disputes. Whether you're repeatedly using the same form contract or entering a high-value deal for the first time, having a legal review can save you substantial time, money, and frustration down the road.
The Dangers of Reused or Unclear Contracts
A common scenario involves contractors using the same agreement repeatedly without periodic legal review. For example, a general contractor who frequently renovates homes or commercial spaces might reuse a standard contract. However, if that document hasn't been reviewed by an attorney or hasn’t been updated in years it may be deficient concerning key issues such as payment schedules, scope of work, or approval of change orders.
Change orders are especially problematic in remodeling projects. If the original contract doesn’t spell out how change orders should be approved, disputes can arise when the scope of work evolves. This lack of clarity opens the door to litigation, often over simple misunderstandings.
Real-World Consequences of Ambiguous Language
We often encounter contracts where basic terms are open to interpretation. One example shared on our podcast was a personal experience: a renovation contract merely said "paint the house," which led to a dispute over whether that included cabinetry. Because the language was vague, resolving the disagreement required additional negotiations and a detailed change order.
Lawyers help avoid these situations by writing with precision. When a lawyer drafts or reviews a contract, they anticipate where things could go wrong and structure the language accordingly. For instance, that revised change order spelled out: “Cabinets and any surface that has been touched shall be painted, and the property shall be left in make-ready condition with no rough, unpainted surfaces.” This kind of language can eliminate disputes before they arise.
Startups and Operating Agreements: A Common Pitfall
Another area where ambiguity causes major issues is in forming new businesses. Friends or colleagues often form an LLC and file with the state without involving an attorney. This may work fine—until it doesn’t. When conflict arises over roles, profit-sharing, or dissolution, a vague or boilerplate operating agreement won’t cut it.
Key issues such as ownership percentages, voting rights, dispute resolution, and member exit strategies must be clearly outlined. Texas courts look to the terms of the agreement when resolving disputes, and if your agreement lacks detail, a judge might fill in the blanks in ways you don’t expect.
Under Texas Business Organizations Code § 101.052, LLC members may create and govern their business with an agreement but if there's no agreement or it lacks provisions, default state rules apply, which may not align with the parties' expectations.
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