An exciting moment for any entrepreneur is reaching an agreement with regard to providing deliverables or services to a customer or receiving same from a vendor.  You have had discussions with your counterpart and exchanged a few emails to reach an “agreement”.  You are confident that you have negotiated a good deal and your counterpart assures you that if it does not work out, no worries.  But how best to get the deal you think you have negotiated?  Here are a few helpful pointers from the real world of contracting.

Always GET IT IN WRITING!

If the terms you think you agreed to are not in writing, in the event of a dispute, you (probably) lose.

• Are all material terms in the written contract? Leave them out at your own peril.
• Who drafts? Party drafting the document will have more control over the content of the contract.
• Who signs? Must have authority to bind the party.
• Where is the fully executed document? Easy to save appropriately, but if lost adds another hurdle to enforcing the contract.  If never signed, then a bigger problem.

“It must be enforceable, I found the contract on the Internet.”

• Really?!?!
• Avoid “recycling” documents.
• Facts and circumstances change.
• Laws and regulations change.

“It’s our standard form contract, we never revise it.”

• Wrong!
• Most “form” contracts are revised all the time.
• Terms and conditions can be negotiated.
• Side documents can memorialize a revision without harming the sacred “form”.
• Need to consider relative negotiating leverage. Big v. small business.  Legal counsel can help your small business level the playing field.

“How does my company get out of this?”

• Is there a termination clause? Easy to include in contract.  Without it, your company’s options are limited and expensive.
• Is there an end date? Simple and helpful provision often overlooked.
• What are the deliverables and have they been provided or performed and have they been accepted? Dispute likely if specs and acceptance procedure are unclear.
• Who has breached first? May be a last ditch way for you to get out if other party has breached the contract first

“Why is my small business providing a line of credit to a Fortune 500 company?”

• Because you agreed to it.
• If you are a subcontractor, do not agree to payment after the prime contractor gets paid by its customer.

“The Customer never pays on time.”

• Probably no late payment penalty in the contract…so why pay on time.
• Know your customer.
• Actually manage each customer account.
• Be proactive at first slow payment.

Consult with an attorney… BEFORE YOU SIGN.

• Helps you get the deal you think you are getting.
• Helps avoid problems and expenses down the road.
• Helps level the playing field with the other party.
• Difficult to “un-ring the bell” once you sign.
• Talking to an attorney at a dinner party doesn’t count unless its your attorney.