Before You Sign, Understand What is On the Line
Contracts are important documents and make the business world go round. Contracts are used to ensure that both parties understand the agreement and terms of that agreement. But the underlying importance of a contract is to answer the second question of “What If? Then What?”
A contract should answer as many of the What If? scenarios as possible. I am not suggesting having a two hundred page contract for painting a house. But a two page contract should not be used for selling your business either. Contracts are tools for protecting both parties and become like law in the eyes of a court when there is a dispute. A contract can specify the court allowed to bring action and even choose which state’s laws to apply once in court. For example, a Texas court is bound by Alaska state law if Alaska was the state law specified to be used in the contract.
If there is something in a contract that you do not understand, do not just take the word of the other party. They may not know the answer either. Retaining an attorney for contract review, BEFORE signing a contract, can save you money, business relationships, and headaches. It is best to be knowledgeable regarding your company’s obligations and risks associated with a contract.
After a contract is signed, negotiations are usually out of the question. You are proactive with providing products/services and marketing those products/services, be proactive in the middle step as well. A common mindset of entrepreneurs is the folly that a large monetary
contract is worth all of the risk; and it may be but the entrepreneur
should always know what those risks are BEFORE signing and this can be
accomplished by having a skilled lawyer conduct a contract review.
Categories: Risk Management, Contracts, Liability, New Business Owners
Tags: Risk Management Contracts Entrepreneur Liability New Business Owners
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