Do you need a lawyer to review a contract your business is signing?
Do you need a lawyer to review a contract your business is signing? The short answer is no, but there are many benefits to getting expert advice, particularly where contracts are long-term, high-value, risky or key to your business and here’s why.
If you’re busy running a business, the last thing you need is more “paperwork” to deal with. It can be tempting to sign whatever contract your supplier or customer sends to you. But signing a contract and hoping for the best can expose your business to unnecessary risk, and you could be missing an opportunity to secure real benefits.
Fundamentally, a written contract ensures that everyone is on the same page about the terms of the agreement, reducing the risk of misinterpretation or disagreements later on. Before signing, consider whether the contract you’ve received accurately reflects what you’ve previously agreed with the other party. In particular, check:
- what you’re buying or selling;
- when the goods or services have to be supplied;
- the price of the goods or services, and when that price will be invoiced and paid;
- how long the price is valid for, and in what circumstances the price may change;
- how long the contract is to last, and the circumstances in which the contract can be ended (whether because the relationship has come to a natural end or because one party has done something wrong); and
- what rights one party has if the other party fails to perform their obligations under the contract (e.g. can the contract be easily terminated and can the innocent party claim damages for the losses it suffers, or is the breaching party’s liability subject to an unfair cap or other limits).
If the contract is based on the other party’s standard terms and conditions, it may not fully reflect what you discussed. In this situation, you should clarify the terms of the contract and agree any necessary changes, before you sign.
It’s also important not to rely on conversations, emails, messages and previous dealings with the other party. Contracts often contain an “entire agreement” clause which means that the parties are only bound by the wording of the contract, and they are not bound by what the parties may have discussed and agreed separately in conversations, emails, messages or previous dealings. The bottom line is that only the wording of the contract counts, so make sure that the wording accurately reflects what you’ve previously agreed with the other party before you sign.
It’s particularly important that you understand what your obligations are under the contract and that you’re comfortable you can fulfil them. Again, if there’s any ambiguity or uncertainty about your obligations, or your ability to fulfil them, then please clarify those obligations with the other party and amend the wording of the contract accordingly.
If you’re selling goods or services, it’s likely that most of the obligations under the contract, and therefore the risk in the contract will rest with you. In this scenario, it’s particularly important that there are suitable limits on your liability in the contract to protect you if you do something wrong. Conversely, if you’re buying goods or services it will be important to check that the supplier’s liability is not so limited that you will be unable to have reasonable remedies if the supplier breaches the contract and causes you harm.
Unless the other party has significantly more bargaining power, in most cases the other party is likely to be willing to consider reasonable changes to the contractual terms. It’s therefore always worthwhile trying to negotiate changes to terms that either don’t reflect what you’ve agreed with the other party or which are detrimental to your interests.
If you need assistance with your contract, our Commercial Contracts team would be happy to help you by reviewing the contract, explaining it to you in plain English and, if necessary, amending it to better protect your interests.
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Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
