Yours vs. Theirs

Whenever possible, provide the contract yourself—don’t use someone else’s. You may save the cost of creating a contract, but you will lose that important control over the content that your own contract gives you.

Understand It

Understanding “legalese” may seem like an overwhelming task, if not an impossibility. But if you intend to build a growing business, then you need to become comfortable with contracts, their language, and their meaning.

You should have your lawyer review every contract you don’t fully understand and carefully and clearly explain any terms or passages you don’t completely grasp.

As a businessperson, you must understand that every business transaction has implications for your company. Don’t sign anything blindly. Get past the legal jargon so that you can fully understand the contracts you are signing and be able to protect the best interests of your business.

Standardize

If your business involves a lot of contracts, try to get customers and vendors to adhere as closely as possible to your standard contract. Changing a long contract takes a lot of hard and time-consuming work. Any change in contractual wording requires that the entire contract be reviewed and proofed again. A change in one area can create misleading implications in another area of the contract. And a simple retyping can result in serious typographical errors or omissions. Any substantive change needs to be viewed suspiciously. Are there hidden implications that the other party has insisted upon? Standardization can save you time, money, and headaches.

Safekeeping

It is so easy to misplace contracts—even crucial ones. Keep copies of your contracts in your bank safe deposit box. If the contract is particularly important, have your lawyer keep a copy on file as well. Have one or more office copies available for easy reference. Don’t use the original as your reference copy!

Contracts and Business

There are contracts, and then there is business. My point is that just because you have a signed contract does not mean the other party is always going to honor it. For example, if you are selling to one of the largest customers in the industry and they state that, despite your having a contract setting the price for the next 12 months at $1,000 per item, they need a deeper discount now to match that of a new competitor or they will never do business with you again, you don’t want to just say, “But we have a signed contract!”

Similarly, if you have a key supplier that says they need to raise prices because of a dramatic increase in their raw materials cost, this is not necessarily a request you should ignore. Sure, you could try to force the supplier to keep selling you goods at the old price even at a loss, but is that how you want to do business? Business is filled with unpredictable circumstances, and sometimes you just have to roll with the punches and try not to get too upset.