A contract is a legally binding document that can have far-reaching consequences for both parties involved. This is why you need to be extremely mindful before signing on any dotted lines, whether you’re a business entering a partnership or an individual accepting an offer of employment.
In this article, we’ll discuss five things you should consider carefully before accepting contractual terms and committing to the agreements.
Understand the Contract Lifecycle
First of all, understand that contracts typically undergo a specific lifecycle, wherein they are written, reviewed, executed, and then potentially renewed at the end of the agreement period.
For an employee, this means understanding how long your contract will be legally binding and whether you will have any obligations extending beyond the contract period (such as a non-disclosure agreement or a non-compete agreement). Businesses should consider using CLM (contract lifecycle management) software to help them stay on top of various contracts in which they’re engaged.
Review the Terms and Conditions
The terms and conditions are the meat of any contract and describe the minimum obligations of each party, which can lead to legal issues if breached.
Terms and conditions can include responsibilities, deadlines, fees, compensation, and termination terms. You might look at how a work injury might affect the contract and whether you will be expected to work overtime. You need to make sure you clearly understand the terms and conditions of a contract and be willing to negotiate terms with other involved parties until a satisfactory agreement is reached. Thoroughly reviewing terms and conditions before signing is essential to protect yourself.
Identify Any Potential Risks
While reading through a contract, it’s a good idea to look for potential risks to yourself or your business within the terms and assess whether the risk is worth taking.
Evaluate your obligations, review the schedule and timelines, and consider any location-specific obligations and tasks. Determine whether any of these responsibilities involve any risks and evaluate their likelihood. This will help you decide whether or not to engage in the contract.
Clarify All Roles and Responsibilities
All parties involved need to clearly understand their obligations and expectations, as well as the potential repercussions if these responsibilities are not fulfilled.
A well-written contract should begin by clearly outlining each involved party, their respective roles in the agreement, what tasks will need to be carried out by each, by when, and how this contributes to the overall agreement. These responsibilities can involve work carried out, goods supplied, or payments made. It can also be useful to identify performance expectations or goals or how responsibilities might evolve, especially in the case of an employment contract.
Consider the Long-Term Impact
Finally, remember to think beyond the present moment. Contracts can often have far-reaching implications that extend beyond the contract duration, so you’ll need to consider the long-term impact.
As mentioned, clauses like non-disclosure agreements, non-compete agreements, or automatic renewals can impact your future business activities or your ability to find new employment opportunities. Think ahead and weigh up the long-term benefits with the potential drawbacks before you commit to anything binding.
