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Signing a contract often coincides with an exciting time for your business. It might mean that you have won some new business, or you might have found a great new provider that is going to help you grow your company. In any case, there is often a temptation to go ahead and sign the contract as quickly as possible. However, if you don’t undergo the correct processes, you could face trouble down the line. This article will explain five things you need to do before signing a contract.

1. Check Your Contact Details

While it seems obvious, ensuring that your contract contains the correct details is a step that is many often miss. Having the correct name and address is crucial, especially if you need to issue a notice for breach of contract or a notice of termination later down the line.

Similarly, making sure you have the correct business names will assist in ensuring that the contract is properly signed and executed. If the right party hasn’t signed the contract, you may not be able to use it later.

2. Check the Obligations

Before signing a contract, checking both your obligations and the obligations of the other party is an essential step. You want to make sure that the other party has not included any extra commitments that you have not agreed to when negotiating the contract. 

For example, you must ensure that you only need to provide the narrow set of services that you have agreed to, and no related or secondary services.

Similarly, if you are receiving services, you want to make sure that the other party has to provide all of the services they have promised you during the negotiations.

3. Check the Price

To ensure that your business can function smoothly, you need to be clear on the price you will be paying (or receiving) under the contract. You will also need to double-check the conditions for you paying (or receiving) this price. This is particularly important if your contract involves either party providing ongoing obligations over time.

Some key things to double-check are:

  • what the payment terms are (e.g. 30, 60 or 90 days);
  • if you have to pay the price annually, monthly or once-off; and
  • if the price can increase (e.g. annually or from time to time upon notice).

4. Know How to End the Contract

A crucial aspect of every contract is knowing how and when you can end it, if necessary. 

It is particularly important to check to see if the contract will automatically renew and how you can terminate the agreement if you do not wish to renew.

If are you receiving services, it will typically be beneficial to have a contract that provides you with the ability to cancel at any time. It might also be a good idea to initially have short term contracts. This will ensure you are not locked into any legal relationships that are not the best for your business. However, if you opt for a longer-term contract, you may be able to negotiate a lower price for services.

When looking over your contract, you should also confirm under which circumstances you or the other party can terminate the contract. In business relationships, situations may arise which cause you or the other party to breach the contract. Therefore, you should make sure to check how long you or the other party will have to fix any breaches before the contract can be terminated.

5. Talk to a Lawyer

While looking over a contract yourself will help you to identify any potential issues, sometimes you will need the expertise of a lawyer. A lawyer can identify any key business risks and will be able to explain any clauses that you do not understand. This is particularly important if you are negotiating with a big business who has their own team of in-house lawyers. 

It can be challenging to recognise the risk associated with some clauses, especially if the other party has drafted the contract in a way that you might be unfamiliar with. By having a lawyer review the contract, you can ensure that you are on a level playing field with the other side. This means that you can properly assess any risks.

Key Takeaways

If your business is growing, you will face an increasing number of contracts to read, understand, review and sign. But, you must know precisely what you are signing for. By carefully checking the obligations of both parties and figuring how and when you can end the contract, you will be able to make more appropriate business decisions. However, sometimes you may need the assistance of a lawyer. If you have any questions about a contract that you are looking to sign, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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