What to Look for When Reviewing a Business Contract

Contracts are commonplace in the business world. Whether you are signing a lease for commercial space or equipment, a nondisclosure agreement with a person or party you have a working relationship with, or an independent contractor agreement to perform various services or have various services performed for you, there are many times when you will have to enter into a written agreement with another party.

Many times, parties to a contract are simply told to “sign here” or “initial there.” No matter how much pressure you feel to sign something, you should never do so without knowing what you are obligating yourself to, and the obligations of the other parties involved. 

Contracts are serious business. These are legal documents that, if enforceable, another party can legally compel you to comply by their terms and conditions. For this reason, it is very important to have a qualified business attorney review all legal contracts carefully before you sign them. This way, you will have the peace of mind knowing that all important elements are included in the contract, and that your interests are fully protected.

Tips for Reviewing a Business Contract

Here are some important things to look for when you review a commercial agreement:

Is the contract written in plain English?

The contract should be written in a way that explains the terms and conditions clearly. Be aware of documents that are worded vaguely and seem to leave many areas open to interpretation. The language should be understandable, precise, and all parties should be in agreement about what is being said.

Are all of the details complete and correct?

Review the terms and conditions of the contract carefully to make sure that what is in writing is complete and accurately reflects what has already been agreed upon verbally. One thing that should be fairly basic but is sometimes overlooked is making sure the correct parties are named in the agreement. For example, if the contract is between your LLC and a supplier, be sure the LLC is named on the document rather than you personally.

Are there any grammatical errors in the document?

Look the document over for any errors in grammar that could change the meaning of one or more clauses. This may seem nitpicky, but sometimes, even an error as small as a comma being missing could significantly alter the document. If you are not good with grammar, have someone who is proofread the document for you.

Do you have “out” clauses?

There should be a way for you to terminate the contract for cause (e.g., breach of contract) or without cause if it is not working to your benefit. For example, if you are signing a commercial lease and the landlord wants you to commit for five years, there should be away for you to exit the agreement early under certain circumstances, such as if your business is not making a profit in that location after a year or two.

Does the Agreement have Automatic Renewal Terms?

Find out if there are automatic renewals within the contract and decide whether or not you want them. Automatic renewals are not necessarily bad, you just want to make sure that you are given a generous window of time to cancel a renewal if things are not working out for you.

How will disputes be resolved?

This is a big one; you need to know how the parties will resolve any legal disputes that may arise. Arbitration or mediation as the first recourse can save the parties lots of time and money, but there may also be times when the only way to obtain appropriate relief is through the courts.  Try to give yourself some flexibility when it comes to dispute resolution.

Terms and Conditions can Be Negotiated

Many agreements use standard boilerplate language for at least some portions of it. Keep in mind, however, that just because certain wording is commonly used in other contracts, this does not mean it cannot be changed. If there is something you do not like or you think could be shortened, simplified, or removed, do not be afraid to negotiate these issues with the other party (or parties).

Contact a Skilled Business Contract Lawyer in San Diego

If you are entering into a commercial contract, you need to review it carefully to ensure that everything is correct, and the agreement protects your interests. With so much at stake, it makes good sense to get a second opinion from an experienced professional. At Garmo and Garmo, LLP, we are here to help! 

For skilled guidance with contracts and all other business legal matters in San Diego and throughout Southern California, call us today at 619-441-2500 to schedule a free consultation. You may also message us through our online contact form or stop by our office in person at your convenience.