Avoiding Lawsuits: Best Practices for Drafting Bulletproof Business Contracts in South Dakota

Business contracts form the backbone of commercial relationships, partnerships, and transactions. In South Dakota, as in every state, poorly written contracts are one of the leading causes of costly litigation. Whether you’re a startup founder, a seasoned business owner, or part of an in-house legal team, understanding how to draft enforceable, well-structured contracts is essential to avoiding legal disputes.

In this article, we’ll walk through the most common contract pitfalls, the legal framework governing contracts in South Dakota, and best practices for drafting bulletproof business contracts that protect your company and minimize the risk of future lawsuits.

Understanding Contract Disputes in South Dakota

Before diving into drafting tips, it’s important to understand where most contract lawsuits originate. In our experience advising South Dakota business owners, the following issues are among the most common causes of disputes:

Common Sources of Contract Disputes

• Ambiguous language that leads to differing interpretations

• Missing essential terms, such as payment schedules or scope of services

• Breach of non-compete or confidentiality clauses

• Oral agreements not supported by written terms

• Unspecified governing law or jurisdiction, leading to venue disputes

Contract lawsuits can cost businesses tens of thousands in legal fees, lost productivity, and reputational damage. Many of these risks are preventable with clear, comprehensive contract drafting.

South Dakota’s Legal Framework for Contracts

South Dakota contract law follows traditional principles of contract formation, including:

• Offer and acceptance

• Mutual assent

• Consideration

• Capacity to contract

• Legal purpose

Under South Dakota law, a contract can be written, oral, or implied—but only written contracts offer reliable protection. Written agreements provide clarity, enforceability, and a documented record in case of dispute.

Tip: South Dakota does not follow the Uniform Commercial Code (UCC) in all circumstances—especially for service-based contracts—so it’s important to work with a legal professional familiar with local statutes.

Key Elements of a Legally Sound Business Contract

A contract should clearly and precisely define the rights, obligations, and expectations of all parties. At minimum, your agreement should include:

1. Party Identification

• Use legal entity names, not just trade names.

• Include addresses and contact information.

2. Scope of Services or Work

• Describe what services or deliverables will be provided.

• Specify how and when services will be performed.

3. Payment Terms

• Include due dates, payment methods, and late payment penalties.

• Address tax responsibilities and reimbursement policies.

4. Duration and Termination

• Define the contract term.

• Include termination conditions (e.g., breach, notice period, mutual consent).

5. Confidentiality Clauses

• Protect sensitive business or client information.

• Clearly outline limitations on disclosure and penalties for breach.

6. Indemnity and Liability

• State who bears liability for losses, legal fees, or third-party claims.

• Limit liability where appropriate and legally permitted.

7. Dispute Resolution Clause

• Decide whether disputes will be resolved through litigation, mediation, or arbitration.

• Specify the jurisdiction—South Dakota courts or other forums.

Best Practices for Drafting Bulletproof Contracts

Even contracts that meet legal requirements can be vulnerable to disputes if they aren’t carefully drafted. Below are essential best practices every South Dakota business should follow:

1. Use Clear, Concise, and Unambiguous Language

Avoid legalese and jargon that can confuse the average reader or lead to multiple interpretations. Instead:

• Define key terms up front

• Use active voice and plain language

• Avoid vague phrases like “reasonable efforts” unless clarified

2. Customize Every Contract

Never rely solely on templates or online forms. Contracts should be tailored to:

• The specific transaction

• The parties’ goals and risks

• South Dakota laws and regulations

Boilerplate agreements might save time upfront but can create massive liabilities later.

3. Anticipate “What If” Scenarios

A bulletproof contract should plan for both success and failure. Consider:

• Force Majeure Clauses – What happens if natural disasters or pandemics disrupt performance?

• Change Orders or Amendments – How will changes to scope or pricing be handled?

• Breach Remedies – What are the consequences if one party fails to meet obligations?

4. Specify Dispute Resolution Methods

Decide whether to resolve disputes through:

• Mediation (often less adversarial and more cost-effective)

• Arbitration (binding but private)

• Litigation (public court process)

Also, specify venue and governing law—for South Dakota companies, this ensures you won’t have to litigate out of state.

5. Regularly Review and Update Contracts

Laws change. So do business models. Review your contracts:

• Annually

• After significant business changes (e.g., expansion, restructuring)

• When entering a new partnership or venture

A contract that worked two years ago may no longer meet your needs or reflect current regulations.

Tips for Working with a Business Contract Attorney in South Dakota

Many business owners try to draft or review contracts themselves—but legal guidance from a qualified business attorney can help you:

• Avoid legal pitfalls

• Identify unclear or unenforceable terms

• Ensure compliance with South Dakota’s laws

• Negotiate favorable clauses

• Protect your intellectual property and trade secrets

You don’t need an attorney for every document, but you should always involve one in:

• Large transactions

• Long-term agreements

• Employment contracts

• Vendor or franchise agreements

• Partnership or shareholder arrangements

Real-World Example: How Poor Drafting Leads to Litigation

Consider the case of a South Dakota tech startup that signed a vendor agreement using a generic contract template downloaded online. The contract did not:

• Define performance milestones

• Include a termination clause

• Identify South Dakota as the jurisdiction

When the vendor missed multiple deadlines and refused to refund payments, the startup found itself embroiled in an out-of-state lawsuit—costing thousands in travel, arbitration, and attorney fees. A well-drafted, locally customized agreement could have prevented the situation entirely.

Common Mistakes South Dakota Businesses Make in Contracts

Avoid these all-too-common drafting errors:

• Failing to put agreements in writing

• Leaving out critical terms (payment, delivery dates, remedies)

• Not reviewing before signing—especially NDAs, leases, and partnership agreements

• Using outdated templates or copying another company’s contract

• Failing to specify South Dakota as the governing law and jurisdiction

Protect Your Business by Drafting Strong Contracts

In business, prevention is always less expensive than litigation. A bulletproof contract won’t eliminate every risk—but it will:

• Clarify expectations

• Minimize disputes

• Ensure enforceability

• Provide legal remedies if a breach occurs

If your contracts are vague, outdated, or written without legal review, your business is exposed to unnecessary liability. Don’t wait until a problem arises to find out your agreement doesn’t hold up.

Need Help Drafting or Reviewing a Contract in South Dakota?

At Denevan Falon,  we assist South Dakota business owners in drafting, reviewing, and enforcing contracts that reduce legal exposure and prevent costly disputes. Whether you’re launching a new partnership, hiring employees, or entering into vendor agreements, we’ll ensure your contracts are clear, enforceable, and tailored to South Dakota law.

But our support doesn’t stop at contract formation. As a trusted business and employment law firm, we also help individuals facing issues related to contract breaches or wage disputes. Here’s how we can help:

How Denevan Falon Can Assist You:

• Legal Advice – Get clear guidance on South Dakota’s business and employment laws.

• Contract Review – Ensure your agreements protect your rights and meet legal standards.

• Negotiation & Mediation – We work to resolve disputes efficiently and amicably.

• Litigation Support – If needed, we’re prepared to advocate for you in court.

• Employee Rights Protection – We hold employers accountable and help employees recover unpaid wages and enforce contract terms.

Contact Denevan Falon today for a consultation and take a proactive step toward protecting your business and your rights.