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Starting a business or signing a lease is an exciting time. But before you sign any documentation, you should thoroughly review any legal documents to make sure you understand your obligations and potential liability. This article explains why you should get legal advice before signing a contract.

1. Getting Out of a Contract

Once your name and signature are on paper, it is hard to exit a contract. Unless the other side allows you to exit, you will likely need to establish there has been a ‘breach’ or legally-recognised ‘mistake’ to get out of the contract.

For example, if the other party to the contract has committed fraud or acted illegally, you may be able to exit the contract.


However, once you sign the contract, you will need to perform your end of the bargain. If you fail to do what the contract states, you may breach your obligations. This may give the other side the right to pursue you for damages.

2. Negotiating Terms

A lawyer can also help you negotiate with the other side to make sure the agreement is fair. Even if it the contract is in a set, template form, you can still request to delete or alter unfavourable clauses. This might include clauses that put additional obligations on your business.

A commercial lawyer can also suggest adding clauses to your contract to ensure your business is protected if things go wrong.

3. Ensuring the Contract Reflects What You Have Discussed

Sometimes what you discuss with the other party will not be included in the agreement.

For example, a landlord may agree in person to waive the first three months’ rent, however, you might find that this clause is not in the contract.  


Many contracts contain what is known as an ‘entire agreement’ clause. This means that if there is an argument over the terms of the contract, the court should only consider the wording of the contract. Therefore, it is crucial to ensure that what you have discussed in person is included in the contract.

This is important even if there is no ‘entire agreement’ clause. In this case, the only evidence may be your word against someone else’s and therefore, it is hard to predict what a court will decide.

4. Protecting Your Reputation

In business, your reputation is critical. If a client takes you to court for backing out of a deal or failing to perform your obligations, your reputation will suffer. Court cases are public and social media makes it easy for your competitors to use that information to your detriment. Similarly, disgruntled clients can pass on this information to other potential clients, placing great pressure on your business.

5. Terminating the Agreement

It is also important to ensure that the contract sets out when you are allowed to terminate the contract.

For example, if the other party to the contract delivers the goods or services a week late, you may not be able to terminate the agreement unless it is in the contract.

 

If a delay is going to cause your business major issues, you need to make sure that your contract clearly states that ‘time is of the essence’. Alternatively, instead of terminating the contract, you may seek damages from the other side if they have caused a delay.

6. Avoiding Litigation Down the Track

Hiring a lawyer to review your contract can also save you significant legal fees. If you find yourself in court over the meaning of a contractual term, the court filing fees alone can be upwards of $1,000. This doesn’t include the cost of briefing a barrister to appear in court. Spending a relatively small amount of money reviewing your contract can help prevent litigation occurring further down the track.

Key Takeaways

During a business deal, it is easy to sign an agreement without understanding the terms. However, once you sign a contract, you will be bound by those terms and it is difficult to get out of it. Investing in a lawyer to review your agreement can help you understand your rights and obligations if something goes wrong.

If you have any questions or would like to review your contact, you can contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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