Four Tips to Consider Before Signing a Contract
From lengthy and formal purchase and sale or lease agreements to nondisclosure agreements and employment agreements, written contracts are a routine part of the day to day operations of most businesses. By making sure your contracts are clear and accurate before you sign, you can eliminate a significant amount of risk should things not go as planned. These tips should help guide you in the contract review and negotiation process:
- Never assume that a contract you are given is not open for negotiation. Commercial landlords, vendors, and other businesses often have standard, form contracts. Chances are good that the provisions of any standard contract you are given are written in a way to benefit the entity that wrote the contract. While some contracts are offered on a take it or leave it basis, never assume that to be the case. Request revisions that make the contract more balanced.
- Be sure that you read and understand each provision of the contract, and that it accurately reflects the negotiated agreement. Most of us have signed contracts without reading them through, assuming that the language is boilerplate or standard, and therefore unimportant. Courts will construe and enforce contracts as written, regardless of whether the parties to the contract read the contract before signing. Make sure the contract says what you understand the agreement to be.
- Consider the length of the contract term and whether it provides for flexibility for changing circumstances. If the contract is one for ongoing services for a specified term, does the contract provide a mechanism for you to alter, amend, or terminate the contract if circumstances change, and is the penalty for doing so, if any, reasonable? Similarly, is the contract one which can be easily extended, if need be?
- When in doubt, consult an attorney. Even after you have followed the first three tips, consulting an attorney before entering into a contract can save you time and money. Attorneys experienced in contract negotiation can easily identify unreasonable provisions, inconsistencies, and other risks that can lead to disputes in the future.