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The Importance of Reviewing Contracts Before Signing

22nd January 2024 by Edwina Bones

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Businesses enter into contracts all the time whether they are conscious of this or not. Whether you tick a box that says ‘I agree to your terms’ when you install new software or a supplier attaches their terms to a quotation that you then agree to, you are constantly binding your organisation to third party contracts.

You may not think to look at these agreements – other people must have been happy to sign them after all. So you just put your faith in the other person and sign the dotted line without question….

But if you take the time to review some of these agreements (or ask a contracts expert to do this on your behalf) you may begin to spot some issues. For example:

• They may be too generic, and do not therefore work for your business.
• They may be badly drafted, making it unclear what you are actually agreeing to.
• They may be missing key terms.
• They may contain mistakes.
• They may be extremely one-sided leaving you without protection.
• They place obligations upon you that you simply cannot agree to.

By way of example, I was asked to review an agreement that a rental business had been sent by a key potential customer. The agreement contained a clause stating that their customer would own anything that the rental business provided to them upon delivery. Which is essentially the same as me asking to borrow your car for the day but then asking you to sign a document that states that I will become its legal owner! Was the prospective client trying to steal from them? Not at all, they had simply not taken the time to look through their standard terms to ensure that it fitted the situation in hand. But we only resolved the issue because we had reviewed the contract and negotiated it with the customer.

You may be reluctant to ask someone else to change their terms. But showing that you have read through their contract shows that you pay attention to detail and want the relationship to work. It also allows you to have the ‘uncomfortable’ conversations about what each party is being expected to do before you are committed rather than falling out when your hands are already tied.

You may also assume that a larger business will never agree to amend their standard terms, and in some cases this is true. You will be surprised however where there is some scope for negotiation, especially where you have a good reason for asking for these changes (the rental agreement scenario I gave above is a good example of this!).

You may also find that, even if the terms of the contract are not up for negotiation, you can still protect your business once you understand what the agreement is asking of you by obtaining a certain type of insurance or changing your own commercial practices to address the obligations you have signed up to. You may even decide that you simply cannot agree to what is asking of you and find an alternative party that is willing to offer more reasonable terms. Either way it is always best to enter into any new contract with your eyes open rather than assuming that the other party has thought about and expressly protected your business when preparing their contract.

If you are presented with a contract and do not know whether or not they are fit for purpose or need to be amended in any way then please contact Edwina Bones at e.bones@laceyssolicitors.co.uk or on 01202 377824.