Small businesses and entrepreneurs often operate on a shoe-string budget, findings ways to keep the lights on month after month. As a result, contract review becomes one of the many legal tasks taken on by the business owner. It may be tempting to skim over the contracts or simply sign the agreements to move on to the next thing. But, there can be big consequences in the fine print. Here are 4 reasons why you should understand what you are signing before you sign it:
Not reading is not a defense. The law presumes that parties to contracts have read the contract and understand what they are signing. Failure to understand, or read a contract, is not a defense in the event the terms are unfavorable. A better defense is an offense in this case means taking the time to read and understand the agreement.
(Most) Everything is negotiable. In business, it is often assumed that the parties to the contracts actively negotiated the terms, or at least had the opportunity to negotiate the terms. You cannot get what you do not ask for. You may not get everything that you want, but here are some ways to approach negotiation:
- Be realistic. Relationships matter and taking the wrong approach can kill them quickly.
- Small changes can have big impact to your margins while it may not matter much to the other side
- Consider where the other side is coming from
- Pick your battles. Prioritize and focus on what matters most to your business.
Put it in Writing. Chances are, in a business deal, the terms laid out verbally as part of a handshake agreement before the contract was signed mean nothing after the contract has been signed. There are certain situations where an agreement, or promise, must be in writing for it to be legally enforceable. Here are a few examples of deals that pretty much always need to be in writing or you risk not being able to enforce it:
- Purchasing land or real property
- Deals worth more than $5,000
- Something that cannot be completed in a year.
- Certain deals across borders (states, countries, etc)
Fine print controls when things go south. Not everything goes as planned. Unfortunately, this is when the fine print matters most. Contracts often include requirements of where, when, and how the dispute can be resolved. In some cases, this can mean a required arbitration or other non-court proceeding in a faraway place. These provisions are enforceable and may cost more than a local law suit. Without reading or understanding the contract you sign, you could be waiving your right to traditional litigation.
At the end of the day, business owners need to understand what they are signing. Really do not have time to read everything? The attorneys at Loop Legal can help sort these details out for your business. Reach out to learn how we can help work through one contract or help to establish processes to stay on top of all of the agreements.