People are often more excited about performing their respective duties in their contracts than with the contract itself. Only when things go bad, not remembering the basics of contracts will come to bite them in the back.
Recently, one of my clients wanted me to review a service agreement they had signed with their customer. The contract contained only boiler plate clauses, and did not even mention the scope of service. Both the companies were Indian, however, under the contract they subjected themselves to the jurisdiction of the courts in California! This is a perfect example as to what one must not do while drafting a contract.
These are top 10 things that you should remember before signing a contract.
- Have an effective date in the contract; i.e., specify when your contractual obligations begin
- Use language that you can understand, “legalese” is intimidating, and you know what? Even lawyers prefer contracts written in simple language
- Define your scope of work very clearly in the contract, make sure you document every change in your scope of work as and when you change it, and reference it to your master contract
- Never. Ever. Copy paste clauses of contracts from the internet
- Watch where you litigate your disputes; e., pay attention to the choice of law and jurisdiction of courts
- Do not include all the clauses relating to your service offerings in the master contract; make space for service level agreements, makes your contract simpler and life a lot easier
- In order to limit your financial risks, limit your liabilities, and do not forget to define your risks
- Do not over commit, know your limitations, or at least have a plan to meet your obligations, or else you might end up litigating in California!!
- Do not ever let your sales guys draft a contract, they are focused on making a sale, and may not be paying attention to the repercussions of agreeing to potentially harmful clauses
- Always get your contract reviewed by a lawyer