BEWARE OF THE KILLER BUSINESS CONTRACTS!!
Cannot count how many times I have encountered clients with contracts that are worthless. I am often approached by business owners who have prepared or signed contracts which they thought would protect them but did not.Whether it is promissory notes, purchase agreements, service agreements, or anything else that requires a commitment,
I can always tell when there was no attorney involved.The main problem with these contracts is that people do not understand the purpose of such contracts and why they are needed.Often, clients state that the “deal is simple”; or“there is not much to it”;or“I know this guy, we won’t have a problem”. Contracts are not for the deal that doesn’t go wrong, it is for the deal that does.If you do not plan ahead of time before the deal is made, you are sure to encounter some type of problem,eventually.
When entering into a contractual agreement, always consult an attorney. I say that not because I am an attorney, but because you need a third party to look at some issues that you may not consider. Attorneys that specialize in business law know that you plan for the“breakup”the “incases” or “what ifs.” In caseBob does not do what he said he was going to do, what happens?What if Bob forgets when he is supposed to deliver the goods or does not deliver the goods on time?
You also need to know who you are dealing with. Is this a corporation, partnership,individual, or some other type of entity? Does this person have sufficient assets to pay damages if something goes wrong? Many times, businesses enter into a contract where the other party does not have any assets or is on the verge of going bankrupt. Because,they have not done proper investigation, they are usually left holding the bag when something goes wrong.
Even if you have a contract where clearly, you are right and they were wrong, it does not matter if there are no assets for you to recover. Here are some things to do when entering into a contract.
(1)Do your research on the deal and the person you are doing business with.
(2)If it is a significant deal (one that you cannot afford to be on the losing end of) you need to consult an attorney as soon as possible.
(3)If the other party has drafted the contract get an attorney to review it. Have an attorney that is experienced in business matters (not all attorneys do the same thing),and involve them in the negotiating process. The cost of hiring an attorney at this point can save you a significant amount of money in the long run if things go bad.
(4)Be clear about your roles and responsibilities as well as the other party’s roles and responsibilities. You need to make sure that the contract accurately reflects the deal.
(5)If it is a loan or some type of finance agreement, get financials!
(6)Most of all, be willing to walk away. Some things are too good to be true.
Often business owners choose not to hire an attorney to draft or review their contracts. While I am not going to lecture you on the many reasons you should contact an attorney to review or draft your contracts (although I should), I am going to tell you the things that you need to look out for to ensure that you have a contract that is enforceable and works for you. No matter what you think about the other party, you must realize that a lot of things can happen if the duties and obligations of each party are not specifically set out. Here are some tips to help you when drafting a contract.
- Make sure the contract is in writing. A written contract gives the parties something to come back to if they get confused or forget some of the specific terms. This will allow each party to feel comfortable with the agreement and removes some of the problems that are sure to arise when dealing with contracts.
- Identify the parties to the contract. Who is obligated on this contract? Is it a person or a company?
- Identify the subject matter of the contract. The question is what are you doing this contract for? Is it the sale of poetry books or books on tape?
- You must set out the terms and conditions of the contract a) when will the books be delivered; b) how will the books be delivered; c) what are the particular items that are being sold or distributed; and d) who is to deliver the books and to whom are the books to be delivered?
- Payment arrangements are key when dealing with business contracts. You must determine the amount of payment; whether payments will be made in lump sum or in installments; when are the payments due; will you accept checks, money orders, cash,credit card, or electronic deposit?
- Make sure that both parties sign the contract. Remember,whoever signs the contract is obligated to fulfill their part of the agreement.
- Preventative measures should be included in the contract. Make Sure that there is a clause that determines what will happen if someone does not fulfill part of the agreement.
- Do not put anything in the contract that you are not willing to do. Do not promise money back if you are not willing to do it.
Remember, there is no such thing as a perfect contract. You will probably always miss something. The important thing is to learn from each and every contract you enter into and make sure your contract works for you and not against you. But tobe on the safeside: CONSULT AN ATTORNEY.
This article provides general information.
This article does not provide legal advice about specific legal problems.
Consult an attorney about your particular situation.
