| The role you play in the contracts negotiation | | | | presented with a contract to sign is whether it |
| process can directly impact your rights and risks. In | | | | contains any indemnity, assumption of the risk, |
| general, parties who draft contracts for others to | | | | limitation of liability, waiver of rights, disclaimer or |
| sign are in a stronger negotiating position than parties | | | | similar clauses. The purpose of these types of |
| presented with contracts to sign. By knowing what | | | | clauses is to pass some or all of the risk of the |
| to look for in a contract, which ever side you are on, | | | | contract from one party (usually the maker of the |
| you can better protect your interests. | | | | contract) to the other. |
| Understand What You Are Signing | | | | If you need help understanding these clauses you |
| Whenever contracts are presented to you for | | | | should always consult a professional. The potential |
| signature, you should assume they have been | | | | cost of such a clause may outweigh the value of the |
| drafted by an attorney or someone acting on behalf | | | | contract, and it is imperative that you understand |
| of the company presenting the contract to protect | | | | what rights you are agreeing to give up or liabilities |
| that company's best interest. | | | | you are agreeing to take on – before you sign. |
| The reality is that your best interest and the other | | | | On the Flip Side… |
| company's best interest are not necessarily the | | | | The other side of the coin, not surprisingly, looks a |
| same. You should therefore always thoroughly read | | | | lot like the first in reverse. |
| or have a professional review any contract | | | | If you are drafting a contract you probably want the |
| presented to you before you sign it. | | | | term of the agreement to extend as long as is in |
| This is particularly true as the value of the contract | | | | your best interest (if you are a seller you probably |
| increases. A contract for $50,000 worth of goods | | | | want the buyers locked in for a long time; if you are |
| or services, for example, deserves much closer | | | | a buyer you probably want to keep the deal as |
| scrutiny than a contract for a $500 piece of | | | | flexible as possible). |
| equipment. | | | | You’ll probably want to control the terms of |
| Similarly, if there is a potential of risk involved (i.e., | | | | terminating the contract, so that the other party |
| someone or something could be injured by the thing | | | | cannot get out unless you want them to – or |
| being contracted for), or the terms of the contract | | | | until you want to. |
| are complex, the contract deserves a comprehensive | | | | And, you will probably also want to transfer as much |
| review. | | | | of the risk as possible to the other side. |
| What to Look for If The Other Side Drafted the | | | | Conclusion: Be the One Drafting the Contract |
| Contract | | | | If you are the party drafting the agreement, the |
| If you are presented with a contract to sign, make | | | | conversation will start in your favor. Presumably, if |
| sure that the business terms are consistent with | | | | you hire a professional to draft your contracts, they |
| your understanding of the agreement. Does the | | | | will be written in such a way to protect your best |
| contract actually say that you and the other party | | | | interest. The other side will be left simply trying to |
| are supposed to do what you thought you and the | | | | negotiate some of those rights back for themselves. |
| other party where supposed to do? | | | | Because the side presenting the contract generally |
| If the contract says something different – | | | | controls the terms of the agreement (even if some |
| question it. The general rule of contracts is that | | | | terms are later modified or changed after |
| what ever is written is what is intended. Make sure | | | | negotiations), it may be in your best interest to be |
| it says what you mean – before you sign. | | | | the party drafting the contract. |
| You will also want to take note of how long the | | | | If you enter a certain type of agreement on a |
| agreement is intended to last ("its "term"), and | | | | regular basis, (for example, NDA’s, Service |
| whether there is any provision to end the agreement | | | | Agreements or Consulting Agreements), it will |
| early if you decide you want out (a "termination | | | | probably be in your best interest to have your own, |
| clause"). Attorney's often call termination clauses | | | | professionally prepared, contract templates ready to |
| "escape clauses" because although most contracts | | | | present to the other party. That way you can be |
| are entered into with the best of intentions, it is very | | | | sure that at the start of the conversation, your |
| common for one of the parties to decide that they | | | | interests will be covered. |
| want out early. | | | | If you find yourself in the position of having to sign |
| If the agreement can be terminated early, check to | | | | someone else’s agreement, be sure to read the |
| see if there are any special requirements - such as | | | | contract thoroughly and, if necessary, have a |
| giving written notice or paying a fee. Failure of a | | | | professional review it. Many terms can often be |
| party to follow the requirements of a termination | | | | modified (even in “standard” agreements), |
| clause is one of the most common claims in breach | | | | and a contract professional can help you negotiate in |
| of contract lawsuits. | | | | your best interest. |
| Another important issue to look for if you are | | | | |