People often sign contracts without properly reading through and understanding their different sections and clauses, leading to legal obligations they can’t handle. It’s essential to be aware of these 19 things before signing a contract.
Know the Key Clauses
Standard clauses in a contract often include termination, indemnity, and force majeure. It’s essential to familiarize yourself with the implications of each of these clauses and ask for clarification of ambiguous or confusing language before you sign a contract.
Understand the Contract’s Purpose
Before signing a contract, it’s essential to understand the parties involved, their roles, and its main objectives. Juro explains, “The main purpose of a contract is to formalize new relationships and outline the various legal obligations each party owes to the other.”
Check the Duration and Renewal Terms
You should know the duration of a contract so that you know when you can exit it or renew and extend it. Considering the long-term commitments the contract would legally oblige you to is important.
Identify the Responsibilities of Each Party
A contract should clearly outline each party’s obligations to ensure you can fulfill yours and know what service you’ll receive. If they’re unrealistic or achievable, then it’s best to avoid signing the contract.
Verify the Dispute Resolution Process
The dispute resolution process can involve mediation, divorce coaching, or case evaluation, allowing different parties an alternative to a trial. The American Bar Association explains that there are several advantages to them, noting that many “are cheaper and faster than the traditional legal process” and that they can give parties more participation and control over the outcome of the dispute.
Consider Confidentiality and Non-Disclosure Agreements
Confidentiality and non-disclosure agreements ensure sensitive information is protected. Over a third of American job contracts include a non-disclosure agreement, but if you feel that it restricts you from speaking out, avoid signing it.
Evaluate Termination Clauses
Before signing a contract, carefully read through it and identify all the conditions under which it can be terminated. This will tell you the length of the notice period and any fees or penalties associated with early termination that you could incur.
Ensure Compliance with Laws and Regulations
Carefully reading your contract will allow you to verify whether it adheres to local, state, and federal laws. If it doesn’t, or if it’s missing industry-specific regulations, it’s best to avoid signing it.
Review the Terms and Conditions
Paying attention to the fine print may be tedious and tempting to skip, but it’s important. Juro explains, “When someone asks you to sign a contract, they are really asking you to legally bind yourself or your business to the provisions outlined in the document.” If you’re not careful, this can open you up to costly legal consequences.
Confirm Intellectual Property Rights
Intellectual property rights include copyrights and trademarks. They provide the creator or inventor of property exclusive rights that enable them to reap commercial benefits, so it’s important to confirm that they’re included in a contract before signing it.
Get Everything in Writing
Ensuring all verbal agreements and amendments are in writing in the document will prevent other parties from claiming they were unaware of their obligations. It can also serve as legal evidence in court.
Consider the Impact of Amendments
Before amending a contract, pinpoint what you want to change or add and write it down in a document. Give the new amendment date and title and describe the proposed changes so that other parties can give their opinions and consider their impacts before signing.
Assess the Payment Terms
Payment terms are a clause in the terms and conditions of a contract. TermsFeed explains that they include details of how a business will process transactions electronically, what forms of payment they accept, “and what happens if the buyer cancels a transaction.” Before signing a contract, check that the payment terms’ amounts and due dates are accurate, and look for hidden charges or fees.
Seek Legal Advice
Consulting with an attorney before signing an important contract will allow you to understand its legal implications. This will help protect your legal and financial interests and allow you to negotiate better terms.
Verify the Identity and Authority of Signatories
Before signing a contract, you should confirm the identities of the other parties. Check that they have the authority to sign on behalf of their organizations, because if they don’t, the contract may be invalid.
Understand the Entire Agreement Clause
The entire agreement, or integration clause, is a provision that states the terms in the contract and the final and complete agreement between parties. This means that any previous agreements that conflict with the final terms can’t be used as evidence if there is a contract dispute.
Be Aware of Automatic Renewals
An automatic renewal or evergreen clause activates towards the end of the contractual period and renews the agreement. Ensure you identify whether the contract includes one and the notice period required to opt out of renewal.
Double-check for Errors and Omissions
Before signing a contract, review it with a fine-toothed comb, looking for mistakes or missing information. Double-check that all names, dates, and figures are correct and that the contract doesn’t contain any contradictory terms or clauses.
Plan for Contract Management
Once you’ve read over the contract and had an attorney check it, managing its deadlines and obligations is important. Create reminders on your plan to stop you from forgetting to complete tasks.
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