What to Look for in Contract
Let’s talk contracts!
If you own a business, or work for a business, chances are you have signed a contract.
Contracts are used for many reasons. Maybe you work with a vendor who provides inventory for your business, or maybe you hired an independent contractor to provide services for your business — in either case, you would need to sign a contract.
A contract is the legal document put in place to outline the services provided between two businesses. It defines the expectations for both parties – as well as what the consequences are for not meeting those expectations.
Before You Sign a Contract
How do you know if a contract is in your best interest? Is there a checklist to review a contract? Here is a list of questions you can ask yourself before you sign any contract.
Keep in mind — if you need help navigating through contract terms, the best advice is to contact an attorney.
Who are the parties involved?
This seems fairly obvious, but you want to make sure everyone involved is named in the contract. Are two businesses working together? Are a business and an individual teaming up? Are the parties clearly identified? If you use some type of shorthand throughout the contract, like an acronym, is the full name clearly stated?
What is expected of you?
What are you responsible for? Are you providing a good? …a service? …employment?
What is expected of the other party?
What does the other party have to do?
What happens if one of you doesn’t do what is expected?
Will there be consequences if a party fails to do what is outlined in the contract? What will those consequences be?
What are the terms?
And are the terms clearly defined?
What is the cost associated with these terms?
How is the cost determined? Is the cost determined based on an hourly rate? Is it a flat-fee? Is it based on a specific product?
Is there a delivery associated with certain goods or items?
What are the costs of the delivery, or, how will those cost be calculated? Are there any consequences if the delivery of the service is delayed? Is there a timeline? What is the timeline? What happens if we don’t meet the timeline?
How is the quality of the service or item going to be determined?
What if something breaks or does not work the way it was intended? What will happen?
Is time an important factor in the execution of the service?
If the answer is yes, this needs to be clearly defined. For example, this occurs a lot with construction contracts. Typically it is written that the contractor must make their best effort to complete the project on a specific schedule. And, if the completion isn’t done within a reasonable amount of time, what are the consequences?
Are there any exceptions?
Take the example of a construction contract — daily weather patterns play a huge part in the timeline of the project. How will this impact both parties?
In recent years, many companies have had to make exceptions due to the pandemic, which was out of the control of everybody involved. Other examples are natural disasters. If something happens that is out of the control of all parties involved in the contract – what is the result?
Sum It Up
Contracts are needed when two parties agree to conduct business with each other. It’s important to understand that contracts define the expectations between the two parties. The main points to think about are:
Who is involved?
What is expected of each party?
What is the cost?
What is the timeline?
What is a solid description of the expected service or product?
How will you judge the quality of the service or product?
Still need advice?
If you need help navigating how to review a contract, then I would highly recommend reaching out to an attorney. Find someone in your area that has experience reviewing contracts. The goal is to make sure your rights are protected and that you have a full understanding of what the expectations are.
Are you a small business in Rockford, Il, or other parts of Illinois and Wisconsin, that needs a contract review? I am here to help! Contact us to learn more about our process for contract reviews!
I hope you found this helpful! If you know someone that may need help with reviewing their contracts, please share the information. Stay tuned for more small business tips!
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