Put the pen down! Are you sure that contract sets out your arrangement appropriately and minimises your risks? Before you sign on the dotted line, you should seek legal advice about the contract for the following key reasons.
1. The contract must be valid
There are key elements that must exist in a document to form a legally valid contract. If these elements are not present, it is more difficult to take action under the agreement. In addition, there are two ways that a contract can be signed, so the contract must include the correct signing clauses. Getting this wrong can affect your rights.
2. It must be appropriate
Small businesses often to try save costs by copying contracts or adopting contracts for different scenarios. It is important that a contract is appropriate for the factual situation. This includes making sure words are properly defined and that the contract wording reflects the purpose you want to achieve. Signing a contract that is not appropriate for the arrangement will bind you into something other than what you intend.
3. Understand your risk exposure
Contracts should include clauses that explain who is responsible for when things go wrong. They should also include details of who pays, and how much they pay when loss, damage or a breach occurs. Often the party who drafted the contract will try to reduce their liability under the contract. It is important for you to know what you are going to be responsible for, and how much you will have to pay if things go wrong.
4. Contracts must be enforceable
The purpose of a contract is to document a transaction or arrangement. Unless it is legally enforceable in court, then there is no point to having it. Contracts can be unenforceable for a number of reasons including that they are not a valid contract, not properly signed, contain unfair or illegal clauses and if they are not clear.