We’ve all heard the expression “It’s Greek to me!”- the old saying that people use when they don’t have a full (and sometimes even partial) understanding of a certain concept or thing. I often hear this sentiment when it comes to understanding the meanings of certain contract terms and phrases. Like this one:
“Upon such default, and at any time thereafter, Secured Party may declare the entire balance of the indebtedness secured hereby, plus any other sums owed hereunder, immediately due and payable without demand or notice, less any refund due.”
I mean really, what does this even mean!? If you are a small business owner, you will often be presented with contracts that you are expected to understand and comply with. Here are three tips to keep in mind before you ink your name to a contract.
- Insist on Plain Language: While there may be certain terms that have to be drafted in a specific way to have the desired legal effect, many parts of the contract can be drafted in everyday English that any reader can understand. Remember when your teacher would tell you to keep your writing so that an 8th grader can understand it? That still applies in many instances today! While contracts often have to cover many conceivable alternatives, that doesn’t mean it can’t be written in plain language that everyone can understand.
- Description of Services & Payment Terms: The heart of the contract is the service being provided or the good being sold. Make sure the contract fully describes the good or service and that the duties and responsibilities of each party are very clear. Also, the timing and form of payment is just as important as the amount of the payment. And don’t forget to describe whether late fees may be assessed.
- Don’t Neglect the “Miscellaneous” or “General” Provisions: Far too often, many people see “miscellaneous” and “general” provisions and read “skim” or “ignore.” This part of the contract is key and often addresses what to do if there is a problem or if one party does not fulfill its end of the agreement. The following provisions will often be located in those sections of the contract:
- i) Choice of Law & Choice of Venue – what state’s law applies to any dispute and where should any lawsuit be brought. The applicable law and venue can often have drastic effect on the outcome of a dispute.
- ii) Insurance & Hold Harmless: Are you being asked to purchase certain insurance and/or add the other party as an insured under your policies? Are you agreeing not to hold each other responsible for loss or damage?
iii) Changes: Can changes be made via email and acknowledged by both parties; or do you have to draft a new agreement signed by both parties?
- iv) Notice: How will the parties communicate changes with each other about the contract? Is email acceptable, or only registered mail or hand delivery? What particular persons must receive notice? Generally this should make sense for where the parties are located; hand delivery may not be feasible if you’re in Maryland and the other party is in Iowa. Notice given via means not prescribed in the contract may not be valid.
Finally, be certain to actually read the agreement! And ask questions if something is unclear to you. An ounce of preparation is worth a pound (and months) of legal fees and proceedings. Below is a comment I received recently from my client, Tikoshia Davis who did her ‘ounce of preparation.’
“I was just thinking about you a couple weeks ago because I was at an event and there was a lawyer speaking about what to have in your coaching contracts. He asked us a lot of questions to see if we were all covered like we should be and I was glad to say that I’m completely covered in my contracts thanks to you!! :)Thanks so much for helping with them last year.”
Tikoshia is the Business Coach for Soulpreneurs and has some exciting business coaching programs in the works! Check out her website at TikoshiaDavis.com and reach out to her! tikoshia@TikoshiaDavis.com