Saturday, April 25, 2009

Don’t Sign Any Business Contract Without Having It Reviewed By A Qualified Business Attorney

Like most people, small business owners tend to shy away from signing anything. They avoid contracts like the plague. But this is a risky way to do business. In today’s business climate it is important to memorialize agreements in writing. I advise my clients not to sign anything without having me review it first.

When you are making a major product or service sale or purchase, you need to get the details of the transaction in writing. If you don’t, you will inevitably find yourself in the middle of a heated discussion over specific terms. Does the purchase include freight costs? Can sanctions be imposed if delivery is not met? What if the services rendered are considered unsatisfactory? In many cases a purchase order and/or a written estimate will provide the answers to these types of questions and serve, in effect, as a contract.

For small, routine purchases and sales, you may wish to have an attorney review the basic purchase order or sales documents that you will be using. For larger or unusual transactions, you may wish to have your attorney review the contract you intend to use, if not draft it. After you have been in business for a while and have learned a thing or two from your attorney, you will gain the ability and confidence to write many of your own contracts; however, it is still advisable to have your attorney at least review any new contracts.

For more important contracts, retain the original copy containing the original signatures from all parties. True, in many situations a photocopy or even an agreement without signatures offers adequate proof of a purchase or sale agreement, but nothing can beat an original copy as legal protection.

Any substantive changes to a contract should be noted in writing. If they are in the body of the contract, then each change should be initialed by all parties involved. If it is in the form of an addendum, it should be signed by all parties involved. A contract should specify that it represents the entire agreement between the parties and that any changes must be in writing.

To avoid court and the legal costs associated with lawsuits, contracts should, generally, have an Alternative Dispute Resolution clause specifying that disputes will be mediated and/or arbitrated. If arbitrated, the results of the arbitration should be held binding.

Form contracts available online or in stationary stores are good templates, but nothing replaces a customized contract specifically for your purpose. It does not take a good lawyer a lot of time to review and comment on a contract. It is well worth the investment, because a lot of litigation starts with bad contracts.


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