It’s the new year and if you’re like me, you’re taking inventory of documents that you use or have in your business (and if you’re not, it’s time to make that your New Year’s resolution), whether they relate to taxation, payables, receivables or even contracts that may be expiring and need to be renewed. Or it may well be that you are entering into a new business relationship and you need to set forth terms of that relationship.
Contracts are designed to accurately reflect the understanding between the parties and ultimately serves as a legally binding document in case of any ambiguity or dispute. It is important that the contract be well drafted to include all the important terms, be reviewed by the receiving party to fully understand the implications of the terms in the contract, negotiate changes to the contract and then sign the contract. Signing a contract without having it reviewed by a professional can not only put you or your company in legal trouble, but also affect your relationship with the parties involved.
Last year, I had a clothing manufacturer as a client, who had entered into a one year contract with a designer to exclusively design fabric prints for my client. The designer also happened to be a good friend of my client. The designer sent a contract to my client who signed it without reviewing or having it reviewed because he trusted his friend. My client was under the impression that the designs belonged exclusively to him. Until he received a cease and desist letter from a competitor alleging that he was infringing on their copyrighted designs. The designed friend was copying designs from the internet and passing them off to my client as his own! There was no ownership guarantee or indemnification clause in the contract which would have protected my client from the infringing activities of his designer friend.
The client not only ended up paying money to the competitor to settle the dispute, but also lost his personal and business relationship with the designer friend.
Besides hiring a lawyer to review your contract, here’s a checklist of the terms that you should look out for:
- Names and addresses of parties
- Scope of work or services / Description of products
- Deadlines for performance
- Payment terms
- Cancellation / Refunds / Shipping
- Blank spaces in the contract
- Term of the contract
- Renewal terms
- Terms of Default
- Representations and Warranties
- Limitation of Liability
- Dispute Resolution
- Exhibits and Reference Documents
Stop and think before you sign any document – have you read the document thoroughly, do you understand the language and terms in the document? Don’t sign it if the answer is no.
At Nupur Shah Law, we help business owners draft, review and negotiate contracts. Call us at 646-820- 1366 or email us at firstname.lastname@example.org. I am happy to have a complimentary conversation with you on how to secure and/or defend your rights.