Understanding the Basics of the Contract
What is the nature of this contract? Is it common for the industry?
Who are the parties to this contract, and have their legal entities been clearly defined?
What is the intent of this contract?
Are the terms of this contract clear and not ambiguous?
Is this contract enforceable under the law in the relevant jurisdiction?
Rights and Obligations Review
Also read:
- https://nexgenlegalaid.com/20-key-compliance-issues-every-business-owner-should-know-in-corporate-law/
- https://nexgenlegalaid.com/25-steps-to-incorporate-your-business-a-corporate-law-guide/
- https://nexgenlegalaid.com/what-are-the-30-most-common-corporate-legal-pitfalls/
What are my primary obligations under this contract?
What are the other party’s key obligations?
Are the responsibilities of each party well defined?
Are there performance benchmarks or timelines, and are they realistic?
Are there provisions for changes in scope or responsibilities?
Assessing Payment Terms
What are the payment terms, and are they favorable to my business?
Are there penalties for late payments, and are they fair?
Is there a schedule for payments, and does it align with my cash flow?
Are there provisions for refunds or chargebacks?
Are there any expenses or extra costs that are capped?
Termination Provisions
When can I end this contract?
What happens if the other party breaches the contract?
Are there any penalties or fees for ending the contract early?
Is there a dispute resolution process in place before termination occurs?
Are the termination clauses compliant with applicable laws?
Liability and Risk
Does this contract limit my liability, and, if so, to what extent?
Are there indemnification clauses, and what risks are covered?
Who is liable in case of third-party claims or damages?
Does it contain any confidentiality or non-disclosure agreement?
Are there any risks with regard to intellectual property, and how are these addressed?
Verification of Compliance
Is this contract in compliance with the relevant laws and regulations?
Is there any tax implication or reporting requirement that needs to be notified?
Is it in compliance with existing agreements or commitments?
Are there anti-bribery or anti-corruption clauses that I should observe?
Does the contract comply with data protection law, such as GDPR or CCPA?
Negotiation and Flexibility
Are there any terms that may be renegotiated to a better position?
Can the contract be amended or renegotiated over time?
Are there force majeure clauses that apply to unexpected events?
Is there flexibility in the agreement to scale up or down if business needs change?
Understanding Dispute Resolution
What is the contract’s Dispute resolution mechanism, such as mediation, arbitration or litigation?
Which jurisdiction’s laws are applicable to this contract?
Are attorney’s fees or other legal fees recoverable in case of a dispute?
What time limits apply to asserting claims or resolving disputes?
Final Verification
Have you seen red flags or cause for concern about this contract?
Is this contract in my best interest and should I sign it just as it is?
Conclusion
As such, by asking these questions, you can thoroughly understand the contract, minimize your risks, and make better-informed decisions. A well vetted contract ensures the safety of your business as well as protects good relations between partners, vendors, and clients. Be clear and clarify anything before signing any document.
