There are contracts and there are contracts. Many contracts are entered with every understanding well documented, other contracts are entered into without a single word being written and others are written but are not clear or have important agreements omitted. Most of these contracts succeed, but if circumstances change or a disagreement arises, the consequences of not properly writing a document can result in expensive litigation and destroy a business. With clearer terms, there are fewer disputes and less litigation. The path to the resolution of a dispute should be less expensive even if a lawsuit is filed.
Another type of contract is a form such as an invoice. If the transaction is large, you must take the time to read the “small print.” In most instances, a “form” contract is written to the advantage of the person who created the form and, if there is a dispute, the other party will find itself in a weak legal position.
Another increasing common type of contract is one created by filling out blanks on a contract form found on the Internet. This type of contract is very dangerous. This class of contracts are written to be “fair” but do not necessarily reflect what the parties wanted to accomplished when they reached their agreement. A “fair” contract can cost a party millions of dollars because the “fair” agreement did not reflect the reality of the circumstances of the parties.
How can these problems be avoided? The first step is to enter into a written contract. The second step is make sure you know what you want before you sign a contract. With that knowledge, you can negotiate contract terms that satisfy your interests and, where necessary, can surrender knowingly certain interests in return for other provisions that you believe are more important.
If a contract is important, have the contract reviewed or drafted by an attorney to whom you have fully explained your interests in entering into the contract. Involving an attorney at the outset will be more expensive, but the long term savings can be significant.