When you enter into a contract, you are entering into a binding legal relationship. Whether you are signing a contract as an individual or on behalf of another entity, there are 6 things that you should do before you sign.
1. Check your contract details
This may seem obvious but you would be surprised at how easy it is to overlook the basic details. Make sure that each party’s details set out at the beginning of the contract are correct. Firstly, if you are purchasing goods or services on behalf of an entity, you need to ensure that this is reflected in the contract; otherwise, you may become personally liable for any mishaps. Secondly, parties involved may provide notices using contact details as set out in the contract, so it is essential that the address, phone and email contacts are up to date and accurate.
2. Are you getting what you wanted?
There may have been negotiations prior to the drafting of the contract. After the contract is drafted, if you are receiving certain goods or services, you need to make sure that the contract reflects what was agreed. A written agreement is much easier to enforce than a verbal one. If the written contract and what was verbally agreed does not match, you should discuss this with the seller or service provider. Amendments can easily be made if a contract has not yet been signed.
3. How much are you paying?
Is the price you are paying reasonable? If not, this must be negotiated with the other party before the contract is signed. You should also check the payment terms and whether or not you can meet those terms. If you are unable to make payments as they fall due, the party providing the goods or services may have rights to charge interest and/or engage debt collection services to recover monies owing.
4. What happens if you want to terminate a contract?
There is always a possibility of relationship breakdown, and negotiating an exit method is much easier at the beginning then when the relationship has turned sour. You should check your rights to end the contract if the relationship breaks down or you no longer require the goods or services that the other party is providing. Some contracts may have clauses which make it difficult to terminate or impose some sort of penalty for early termination.
5. What are your rights and obligations?
When you receive a contract, you should check all your rights and obligations under the contract. In terms of rights, you need to consider what rights you have if the other party is unable to deliver what was promised, and also how you can enforce these rights. On the other hand, you will also have obligations to the other party. You need to make sure that you understand these obligations as breach of an obligation may give rise to the other party taking action against you for damages or breach of contract.
6. Consult a business lawyer
If there is anything that is vague or difficult to understand in the contract, you should consult with a business lawyer. A good business lawyer can provide advice so you clearly understand your rights and obligations, or, if necessary, assist you in renegotiating the terms.
Before you sign a contract you need to know exactly what you are signing up for. If you have any concerns at all, you should have the contract reviewed and your concerns addressed by an experienced business lawyer. You should never sign a contract if you are not comfortable with the terms.