Nearly all companies reach a point where they must work in some capacity with others (for example, suppliers and manufacturers). The terms of a contract typically govern these relationships. You may anticipate little risk when contracting with another business, but that could be a dangerous assumption.
All business-related contracts benefit from a thorough legal review to ensure they are fair to all parties — even those involving other companies. In the meantime, here are a few red flags to look for.
Unreasonable or unfair terms
Contracts between companies should never contain unreasonable or disproportionate terms that favor one party to the agreement. Instead, these agreements should generally provide equal benefits, risks and protections to all who sign the document.
The term “unconscionable” refers to provisions that are so one-sided that they are often legally unenforceable. One example would be a provision that places liability on one party’s shoulders alone, regardless of the circumstances. Contract terms that greatly benefit one party over another may also be unconscionable.
Lack of clarity
Sometimes, what is not stated in a contract can be as problematic as what is spelled out. Business agreements function best with clear and specific language that defines the scope, purpose and mutual expectations of the association. Vague language and open-ended provisions usually spell disaster.
Of course, this is not an exhaustive list of possible pitfalls that may lie hidden in your business contracts. It’s important to get a comprehensive legal evaluation of your agreements to pinpoint their strengths and weaknesses. Then you can rest easier knowing that this element of your business dealings is in order.