You’re busy. You have client meetings and deadlines to make. You take a glance at that contract you’ve been meaning to thoroughly read. It looks official. There are all those big, impressive words and fancy clauses. You think, “why not just sign it and save some time? Everything seems in order.” 

This could be one of the biggest mistakes you ever make. Rushing to sign a contract is the opposite of ‘I came, I saw, I conquered’. Instead, it could become, ‘I rushed, I signed, I regretted.’ 

Here’s why:

Legally binding contracts are an important part of any business. But if you sign a contract before you read it and understand it fully, you run the risk of missing key components of an agreement that could potentially hurt, or even destroy your business.

When developing a contract, I recommend the following:

• First of all, read the contract. You are responsible for whatever you sign - make sure you understand it. One bad deal can cost you money, or even your entire business.

• Do what the big companies do. Prepare your own “standard contract”, with appropriate protections for your company. This can serve as the basis for the deal, especially when you and your opponent are of relatively equal bargaining power.

• If you are dealing with a business that has far more leverage, consider preparing an addendum or supplement to their contract that contains the most important protections for your business. 

• Enhance your own leverage. Your bargaining power will be vastly increased if you have alternatives. Moreover, you may very well turn to one of those alternatives if your negotiations prove to be too difficult. 

• If you start the negotiations early enough, you avoid the situation where you are forced to do business with someone, or cave in on a contract provision, just because you ran out of time. The mantra of your negotiating team should be “make time your friend.” Usually, the party in a rush is the one that must make concessions.

As I discuss in my recent Legal Edge column in SmartCeo, there are plenty of reasons to sign agreements quickly, but rarely a good reason to dive into a bad deal. Remember: contracts endure, don’t get stuck with something you aren’t fully committed too.

Files: 

LegalEdge-4.dceo_.01.12.pdf