In this week's Freedom Friday blog and e-mail newsletter, I want to address an issue I see with many of my clients, and that is red flags in contracts. I am often asked by clients to review their contracts, and I always look for red flags or traps that could trip up my client and get their small business in trouble down the road. In today's Freedom Friday blog, I want to talk about three (3) major red flags to watch out for in contracts for small businesses:
1. The Parties to the Contract
This may be strange, but the first possible red flag to any contract are the parties to the contract. This is not the parties themselves, but before you sign any contract, you need to make sure that the parties listed on the contract are actually correct. This includes checking for the correct business entities, dates, time frames, etc. A mistake in this area could be costly to your business. Make sure you double check these details, especially the parties involved, to be sure the financials of the deal are going where they need to go.
2. Payment Terms
Again, at first glance payment terms might not be considered a red flag, but if you get it wrong, it could be costly to your business. There needs to be an agreed upon price and schedule of payments understood by both parties. There are two essential parts of the payment terms of any contract. First is the consideration, which is usually some form of payment or money, but also can be a binding promise to perform certain work. Second is the terms themselves, which lay out the specifics of what products or services are to be expected, and how these products or services will be paid for. Make sure to double check the accuracy of the payment terms section of your contract for your business.
The third red flag to watch out for is penalties. This is the area of the contract which addresses what happens if one of the parties does not fulfill their obligations that are outlined in the contract. There are two things to watch out for here, as part of the penalties issue. One item to watch out for is a “cure period.” Mistakes do happen, and many contracts will allow a “cure period” to fix mistakes. The other issue with penalties is a contract enforcement provision called “venue.” This provision affects where the contract can be enforced in a court of law. Many contracts require the contract to be enforced in a state where you do NOT live or have your business situated. It is not uncommon for a vendor to send you a contract only enforceable in their state, but not your state.
If you are interested in starting a small business anywhere in Oklahoma, or if you have a small business and you are looking to grow, please feel free to contact me at [email protected] for a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com