5 Important Things to Know About Contracts
I am regularly contacted by clients who are concerned about contract issues. They often feel overwhelmed, unqualified, and even fearful when faced with a new contract, full of legal mumbo jumbo. Since I work with contracts all the time, it seems like a basic primer on contracts from a lawyer’s perspective might be helpful in reducing the stress factor associated with contracts.
Enjoy.
#5. You Need to Love Contracts
Contracts are an important part of being in business. Contracts are how business gets done in the world, no matter what kind of business you’re running. Seriously. If you hope to have a financially successful business at any point in your journey, you’ll be signing many contracts. You’re going to see contracts from partners, investors, vendors, customer's, clients, etc. Get ahead of the game and learn about contracts now. Embrace it.
#4. What Do You Give? What Do You Get?
Don’t sign a contract just to have a contract. It’s important to review every contract to ensure that it accomplishes your goals and objectives. In the beginning, during the contract negotiation stage, it may help to start with a simple list where you write down the most important items that you want to have in the contract. List your obligations as well as the money or other compensation that you expect to receive. Use this list when you review the contract to make sure that it contains the important elements that you care about. Remember, signing a contract is a bad idea unless it fills a need that you have; something that will help your business grow.
#3. Everything is Negotiable
Every contract will have tons of details that can be negotiated. You may not always get your way because the bargaining power of the other person or company may mean that you have to take it or leave it. Possible rejection doesn’t mean that you shouldn’t at least try to have the contract adjusted to be more favorable to your position. You may be surprised at what you’re able to negotiate if you simply ask. Don’t like the terms you’ve been offered? Push back. Make a counter-offer. Walk away.
#2. If You Don’t Understand It, Don’t Sign It
Contracts are legally binding agreements and every phrase in the contract has a specific meaning. Don’t cross your fingers, sign the contract, and simply hope for the best. If you feel unqualified (and you may be) to understand the legalese in the contract, then get help before you sign anything. I can’t tell you how many times a client comes to me after they’ve signed a contract because they need help in understanding what’s in the contract. While hiring a lawyer can cost you some money, it will probably pay off if it keeps you from signing a bad contract. Additionally, a good lawyer can explain important concepts and terms so that you understand exactly what you’re getting into when you sign the contract.
#1. How Do I Get Out of It?
I know, I know. Why would you want to get out of the awesome contract that you just signed or are just about ready to sign? Well, a contract is a bit like a marriage or other relationship. It all seems wonderful, perfect, and even amazing in the beginning. Best. Thing. Ever. amiright? However, just as with any other relationship, things tend to change over time. Maybe it’s not such a good fit anymore. Maybe the other person or company is being a pain in your neck (or some other anatomical region of your body). For many different reasons, it is quite likely you’ll need to terminate a contract at some point in the future. It is critical that you know how to do it so that you can terminate the contract when you need to terminate it. Otherwise, you may be stuck in a bad marriage and ain’t nobody got time for that.
Remember – Be Smart. Be Legal.
Disclaimer – Yes, I’m a lawyer, but I’m not your lawyer. All information in this post is provided for educational purposes only and should not be considered legal advice for any person or specific situation.