Contracts come in all shapes and sizes. There are employment contracts, residential lease contracts, and Fifty Shades of Grey contracts (probably not enforceable).
Contracts are like written promises. And like promises, they can be broken, and when they are there are consequences (like that time Dave promised to bring me home ice cream when I was nine months preggo and didn’t deliver).
Knowing what you sign is important because contracts are legally binding documents. Unfortunately, contracts are often long and boring and easy to skim over. And while your attorney should read over any important document before you sign it, here are 5 things to be on the look out for.
Not that kind of party. Who is a party to the contract? The first page and the signature page of the contract usually spells out which people or companies are obligated under the contract. Is it you or your company? Are you personally guaranteeing the contract? If so you’re on the hook if you’re company can’t pay.
2. What are your Rights?
Make sure you’re getting what you want, and not giving away more than you mean to. Make sure any provisions about licensing and any intellectual property rights, including copyright and trademark are in there if you want them. Is there are noncompete clause? Double check before you’re jobless and prevented from working for competitors.
3. What Constitutes a Breach of Contract?
Those broken promises. When you breach a contract, you’re in default of that contract. Before you sign anything, you’ll want to know what constitutes a default – because when you breach a contract, that’s when you can be sued. Is a default failure to pay on time? Is it assigning your rights to someone else? Generally a party breaches when a person doesn’t perform a term of the contract (like not paying rent), when a person fails to perform on time (like paying rent late), or if the person doesn’t follow the terms of the agreement (like subleasing to a stranger without getting your landlord’s permission when your lease says you need permission).
4. Forum Selection Provision
If you do have to hash it out in court (or mediation), make sure it’s where you want to be. Contracts usually include a forum selection clause which spells out the location of any future fight. I’d rather be litigating in sunny South Florida than in Boston during winter. Although I do love a good excuse to sip hot chocolate by a fireplace with my BC girls!
Read: Cash Money. In the best case scenario, this is what you get when the other party to the contract breaches and you get a judgment against them. Worst case: it’s what you have to pay. If you missed a payment, do you just have to pay them what you owe? Or more? Are you liable for attorney’s fees?
The verdict: Make sure you read the terms before you sign your life away.
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