Tweet

10 Things you need to know before entering into a contract

Written by: Frederic R. Abramson

Article Overview: While litigation may sometimes be your only recourse, many times it is a result of signing a bad contract or not fully examining the contract you have signed. Here are ten things to know before entering into a contract that can help protect your business and your assets:

10 Things you need to know before entering into a contract

While litigation may sometimes be your only recourse, many times it is a result of signing a bad contract or not fully examining the contract you have signed. Here are ten things to know before entering into a contract that can help protect your business and your assets:
1. Know the Other Party
Be sure that the business you are contracting with is registered to do business in the state in which you operate your business. Should there be a problem later on, it will be much easier to institute a lawsuit as the states maintain addresses for service of process on registered corporations. In addition, if the business is not properly registered in the state, there could be legal issues with your contract. The business should also be licensed in the specific type of business it conducts, if this is required.
2. Pricing Issues
If you are a buyer or a seller, know what you are paying or getting paid, when the money is due, how it is to be paid, where it is being paid to.
3. What is the Exact Product or Service
While this may seem obvious there are thousands of lawsuits on just this issue. Be sure you and the other party are on the same page, literally and figuratively.
4. Delivery of the Goods or Services
Specify exact time frames for delivery of the product or service and when payment is due in relation to this time frame.
5. Condition of the Product or Service
Are the items new or used. If used, how much. If new, in original packaging or repackaged. If a service contract, specify who will be doing the service and his or her credentials.
6. Warranties
What are the guaranties on the product or service. What period of time do they cover. What is the procedure for repairing or replacing an item or correcting a service mistake.
7. Getting out of the Contract
While most contracts are made to avoid getting out of them, you can sometimes negotiate an “out” clause for poor performance or lack of proper delivery or other essential things.
8. Renewal of the Contract
Is there an automatic renewal? Is there any option to renew?
9. Default
There are several ways to default on a contract. Two prevalent ways are non-payment and non-performance. Non-payment can include not getting paid in full, on time or at all. Non-performance can be not doing the job properly, in full, or not how you expected it to be done. All of these can be combated with remedies in the contract.
10. Remedies
Make sure the contract has a section dealing with remedies for defaults. Remedies are compensation to the injured party for such defaults. Outside of the contract there are other ways to be compensated for default in contracts, including state statutes, federal statutes like the UCC, fraud actions and illegality of the contract, dealing with minors, duress, undue influences, etc.

Related Articles
  What\'s a Surety Bond?
  How to Write a Business Contract
  Features of a Marketing Agreement
  Contract Management Services – For The Supplier Or The Purchaser.
  Plain English Guide To Contracts

Article Tags: assets, contracts, corporations, credentials, essential things, exact product, exact time, guaranties, lawsuits, litigation, mistake, money, period of time, poor performance, proper delivery, recourse, service contract, time frame, time frames, warranties



Related Forum Posts
Cost vs Benefit - I like Albert's post about positioning training in terms of ROI, I find trying to sell training to people or corporations without an ROI element in the pitch is almost impossible especially as a newer company entering the market. I also found recently the value of not trashing one's competitors when I landed a contract and the client told me how badly one of my competitors had trashed the other players. Selling on your own benefits and not the shortcomings of others may seem like common sense, it's just nice to get the break for clean living once in a while. Cheers!
Choose 'stability' in a franchise - Tapping into current 'trendy' franchises can be risky business - You may find yourself stuck with a longer term 10yr contract. What happens when the trend fizzles? Your investment disappears... There are a whole host of factors to consider when entering into the arena of franchising. A few items on the check list that should steer you into safer waters... away from the predators... are listed here. 1. Age (stability): 10+ years 2. Satisfied franchisees: 85% + satisfaction 3. Size (stability again): 250 units 4. Strong profits 5. Great management There are other measurements that need to be considered like - identifying accurate store profits. There are short-lists of franchises that meet these criteria. That's for another thread...
Re: Did you buy into the iPhone 3G craze? - Kevin, Doesnt Telus have good promotions for their long standing customers?? I got my Pearl for virtually nothing because I had been with Rogers for like 10 years.... I also just added a new phone to my contract and bought the new Razor for $50?? Perhaps you can jump up and down and threaten to move your contract?? good luck J
Your Riskiest Business Decision - Greetings All I was just thinking about my own Graphic Design business and how I've made risky decisions in the past. One of these decisions involved taking on a long term, full time contract at the expense of losing new and existing clients for the next 2 years, as well as having to satisfy existing clients on the weekends. Would the contract kill my entire freelance business after 2 years? Would it be worth it? As I'm nearing the end of the 2 year contract and I would have to say that it's paid off. This is because I managed to run my own business on the side (weekends) to retain most of my existing clients so when/if I decide to go back to full time freelancing I won't have to start from the beginning again. In saying this I would like to know of any risky business decisions that you have made and whether it paid off or not? My 2 year contract decision did pay off but I also lost two good clients because I did not have the time to efficiently satisfy their requests.
Re: Choose 'stability' in a franchise - [quote="RussellWebb":2gm9ygof]Tapping into current 'trendy' franchises can be risky business - You may find yourself stuck with a longer term 10yr contract. What happens when the trend fizzles? Your investment disappears... There are a whole host of factors to consider when entering into the arena of franchising. A few items on the check list that should steer you into safer waters... away from the predators... are listed here. 1. Age (stability): 10+ years 2. Satisfied franchisees: 85% + satisfaction 3. Size (stability again): 250 units 4. Strong profits 5. Great management There are other measurements that need to be considered like - identifying accurate store profits. There are short-lists of franchises that meet these criteria. That's for another thread...[/quote:2gm9ygof] Hi Russell, Looking forward to seeing this short-list!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

What I Really Want Is...

10 Steps to a Great Support Team

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.