Once you sign a contract, you are legally bound to it. And after that, if you don’t keep your part of the bargain, the other contract holder has the right to take legal action against you. So, before you sign any contract, there are things you should do, consider, and know (such as understanding your responsibilities and rights before entering into an agreement.)
- Read the Fine Print
Whether they are long or short, contracts are binding, even those that don’t look too legal or use a lot of complicated legal language. They should be written to clearly detail the expectations and results required of both the seller and the buyer as well as providing for the terms and conditions surrounding the agreement. Reading every word and fully understanding the contract before signing it may save you from paying for goods or services that you don’t want or being obligated to provide services that you are not qualified to provide. It is important to make sure all boundaries and relevant details are included to eliminate any surprises or unexpected demands. Be careful when discussing the terms of the agreement and ensure that all verbal details are well-documented and understood before signing. Be sure you are able and willing to deliver on all elements of the contract, if not, keep negotiating!
- Check the Currency of the Agreement
In what currency will you get paid? Whether you’re about to sign an employment contract for a foreign company or provide goods and services for someone overseas, you must confirm the currency of the agreement. Is it paid in dollars, euros, or cryptocurrency? If there is an exchange rate noted, be sure to check whether it is fixed or variable. If the currency is variable, the fluctuations may work against you. If you don’t want any risk, negotiate for payments in a more stable currency.
- Watch for “Auto-Renewal” and “Auto-Price Increases”
An automatic renewal contract clause, also known as evergreen or self-renewal clause, acts to keep renewing the contract, often for long periods such as 5-year terms. Termination notice on these types of contracts is often hidden in the fine print and can have notification periods of as long as 90 to 120 days. In other contracts, we have seen automatic annual price increases that are non-negotiable. These increases can be significant and can cause financial hardship to your business. Keeping track of these contracts and clauses can be challenging for business owners who often have more pressing decisions and deadlines such as completing customer projects and issuing payroll to staff. Having a professional bookkeeping service manage these contracts for you can take the stress out and ensure you don’t get locked into long-term deals that do not serve your business well.
- If in Doubt – Seek a Legal Opinion
If there are any parts of the agreement that you don’t understand, you MUST seek a legal opinion from an expert. This article must not be considered legal advice — it is merely attempting to share some of the pitfalls you may encounter when presented with a contract to sign. You may find written agreements too complicated to understand, but that shouldn’t make you feel uneasy. It is imperative that you fully understand every contract and clause before signing it. If you don’t seek advice when needed, you could be exposed to a multitude of financial and other obligations.
- How to Cancel a Contract
Before signing the contract, it is always a good idea to find out how to cancel or end the arrangement. Usually, this is detailed in the termination clause. What will happen in case of termination? A contract can be terminated due to the impossibility of performance, breach of contract, prior agreement, rescission or completion of the deal. In the termination clause, lies the list of reasons and the notice period, in case it comes to contract termination. You need to be aware of all your entitlements in case that happens.
Before you sign a contract, you should have a clear view of what you’re getting into. Consider these things before signing to save yourself from future headaches.