Every one of us yields to temptation now and then. No, not fatty food or that extra beer. We’re talking about the temptation to skim through a contract without carefully reading it. Yes, it may seem like everything you purchase or every agreement you enter into – no matter how slight – involves a contract. But if you sign on a dotted line without actually reading the included verbiage, you’re essentially signing a legal document without knowing what you just signed up for. RRS partner Jim Howicz breaks down what that could mean below.
Don’t Just Sign on the Dotted Line
Today, I’d like to talk with you about something every business must deal with: contracts. You simply can’t operate your business without them. Written contracts govern everything from your office list to the supplies you buy. My advice regarding contracts is very simple: read the agreements you are asked to sign and obtain counsel to help you through them, if necessary. You need to know what you’re getting into. I’ve had several clients say to me after I’ve given them bad news, “I wish I knew that before I signed the contract.” This is generally a problem you can avoid.
Remember, the purpose of a contract is to capture the intentions of all parties involved. They are designed to be – and the law calls for them to be – the primary (and sometimes only) thing used to settle a dispute. You should take care to ensure that your contract clearly specifies the compensation required, and when it must be paid.
A contract should also define the quality of the service and how and when it should be delivered. Contracts routinely specify where a dispute can be litigated, and whether it must be settled in front of an arbitrator instead of the court. Contracts can also sometimes limit the amount of time in which a claim can be made against another party, and it can often place a cap on the type and amount of damage.
There is No Such Thing as ‘Fine Print’
These terms have large implications if your business relationship does not go as planned. Many of these terms are in what people write off as boilerplate or fine print. This is a common misconception. Every word is in a contract for a reason. Success in business comes from understanding and balancing risks. Contracts are designed to shift that risk between the parties.
In a commercial contract, the risk on each party is generally what the parties agree upon. If you do not understand what these risks are, you should consider getting counsel to help you through it. It’s unlikely that you will encounter a situation where you are signing a contract that does not involve risk. Your products and services should be priced to compensate for them.
Counsel can also help you negotiate for more favorable terms. I usually go by the adage, “It never hurts to ask, and you don’t get what you don’t ask for.” Sometimes that’s all it takes in a negotiation. In cases where the other party will not change their position, you can at least make an informed decision on whether to proceed.
Protect Yourself and Your Interests
In closing, I cannot stress this enough: read contracts before you sign them. Even if the situation that calls for a contract seems to be congenial and not necessarily fraught with risk, you can’t always know what the future holds. In more complex cases, or situations where you may not have a firm grasp on potential outcomes, it can often be prudent to engage counsel to help you. Knowing the risks you take will make you run a more consistent and more successful business.
If you’re struggling with a contract negotiation or are in need of experienced counsel to help untangle confusing contract situations, Richards Rodriguez & Skeith’s Business and Transactional team may be able to help! Contact us today to schedule a consultation with one of our attorneys!