Don't ever sign on the dotted line before carefully reviewing a business contract. Yes, you want to work quickly because the business world never sleeps, but you don't want to make a mistake that hamstrings your company for years to come. This is especially true if you're a relatively new business owner who is signing one of his or her first major contracts, without much experience to fall back on. Key areas to consider include:
1. Your rights, their rights, and obligations on both sides.
For instance, when do you expect deliveries? How do payments change hands? Do you have the right to break the contract under certain conditions? You may be signing away some of your company's rights - such as the right to negotiate with companies that the other party considers to be competition - and you must know what they are so that you don't accidentally breach the deal.
2. Exactly what will change hands.
This is the most basic - but also the most crucial - element to review. What products are being purchased or sold, what are the exact costs, and how could those costs change going forward? The last thing you want is miscommunication that results in you not receiving what you expected and seeing your entire operation grind to a halt while it's sorted out.
3. What performance requirements exist?
This could impact all aspects of buying products, parts and materials. How promptly should deliveries arrive? When do you place orders? Exactly what performance are you expecting to see, and what's expected on your end?
4. What is the duration of the contract?
Some contracts are simply for a year, renewed annually if both parties agree. Others are long-term deals that stay in place unless certain conditions arise. You must know exactly how long the current deal applies and when you can renegotiate.
5. How will disputes be resolved?
Do you want to have a set process in place if a dispute arises? What does each side need to do to notify the other before taking legal action? Naturally, not all disputes are resolved simply through communication - such as a situation in which one party believes the contract has already been breached and the other does not - and you may still need legal assistance. But it's wise to understand up front what action to take and how the process begins.
Once a contract is signed, it's a legally binding document. It locks in your rights, obligations and duties. Never take this lightly. Always go over the paperwork with a fine-toothed comb, know exactly what key points you should be looking for, and only sign when you're absolutely satisfied on all counts.