I get that for most people, contracts aren’t what dreams are made of. But for me, when I hear the word “contract”, my heart skips a beat. I can’t describe how thrilling it is to see defined terms and the long words that they hang off arranged in paragraphs and sub-paragraphs. It’s very exciting.
Contracts are beautiful. Contracts are an expression of two or more parties’ collective will. Contracts make what might be unspoken, assumed or ambiguous, clear.
A well written contract will be a map to guide those who have signed on the dotted line, with respect to how they will work together. So a well written contract will reduce the chance that your business relationship will be fraught with disagreement and possibly end by one party receiving an unpleasant letter from another party’s lawyer.
My clients ask me what I look for in a contract when I’m reviewing one. Without wanting to reduce the fine art of contract review to a few points, here are my top 5 things that I look for:
- Who is contracting?
That’s easy, you say. Me! And the guy who is building my house/website. But is that person a ‘natural’ person (ie, a human) or are they a company? Are you contracting with one person of a three member partnership, none of whose members have any assets? You need to make sure that the right party signs, and that they have the authority to sign the contract on behalf of that party.
- For what period – when and how does the relationship start and end?
Do you want to be bound to use the same delivery company for the next ten years? Maybe not. You want to be able to get out of the contract. So you need to be clear about how many months or years the first term of the contract is, and what provisions there are for any further terms. You also need to know how the contract can be terminated early, either because one party wants it to, or because there has been a ‘termination event’ or an ‘event of default’ which could be a precursor to early termination.
- What is being provided?
You need to ensure that the goods and/or services are carefully defined. For example, if you have a contract with a cleaner to clean your office, what exactly does cleaning mean? Do they empty your bins? Do they do the toilets (even the stinky mens’ one on the ground floor)? Or do they just give everything a nice gentle wipe (I’ve been there…).
- How is it going to be paid for?
Hint: $US generally means more than $AUS. Monthly in arrears is better than upfront if you’re the one paying. By cheque can be a problem if you don’t live in 1984 but the other party does.
- Are there any special conditions regarding the provision of the goods or services that we need to note?
We do not provide any Services on Fridays including in case of Emergency on Fridays because Fridays are very, very important to Us and if You need our Services on a Friday You will have to find us at The Pub and We reserve the right to not leave The Pub to provide the Services (although we may in our absolute discretion offer to provide them remotely from the Pub if you sign a Waiver with respect to any Services so provided) even if an Emergency arises unless the Emergency is a Special Emergency in which case We will deliver such Services at three times our Normal Rate (“the Special Emergency Rate”).
I can’t say that if you’ve got the top 5 covered, you’re set. It is however a really good start. But contracts are sneaky; while they’re written in English, it’s a little like English in the way that Dr Who is a human (ie, she looks like she is… but she’s not). They’re written in Lawyer. If you are thinking of signing a contract of any importance at all, I can’t impress upon you how important it is that you see a lawyer. Even if you wrote the contract – indeed, especially if you wrote it.