A List of “Considerations” When Entering Into A Contract
So I’ve been meaning to do this for a while and finally got a sec to put something together. Below you’ll find a brief list of considerations I’ve found people should be keeping in mind when entering into certain contracts.
These generally apply where someone is purchasing or selling a tangible good (i.e. a radio or shoes). Some of the concepts are translatable between different types of agreements, but some aren’t. Where a distributor relationship is being set up, or something intangible like a trademark is being sold, then there are a whole host of things that have to be considered.
But before you delve in just a few thoughts:
- These considerations may seem a bit “comprehensive” (they’re actually longer than some contracts I’ve reviewed) and run counter to the movement to condense contracts down to half a page (ok, perhaps I’m exaggerating a bit). But parties must remember the primary role of a contract is to memorialize their intent so not only they know later down the line, but where the contract ends up in dispute, an arbitor understands what was going on too. So a contract that’s 1 and 1/2 pages long is great, but if it leaves 80% of the understanding between the parties out what good does it actually serve? Doesn’t mean the contract has to have the mass of a Merriam Webster dictionary, but having an incomplete agreement can be just as dangerous as having no agreement at all.
- I specifically decided against a template. Primarily because I don’t want to create the impression that this is a comprehensive end all be all list. Contracts are tremendously personal documents. So most of the content will depend on the specific circumstance; sophistication of parties, their location, the transaction type, industry and the relationship of everyone involved. I also don’t want readers to just take this and run thinking they’re fully covered….
- Speaking of taking things and running I also titled this “Considerations” instead of “Checklist” purposefully. **begin rant** As with many professions, I’ve heard a general hesitation to post resources because folks feel they’ll put themselves out of a job. And when resources are posted, they’re generally some rooty-poot explication of a general concept (“Why We Love Contracts And You Should Too”) with a few citations and directive to call for more information. After all, if people just go around posting resources all willy nilly what’s to encourage readers to actually seek professional help? And with the rising popularity in sites with repositories of contract examples trolled off the internet this reasoning isn’t totally baseless. But in my mind, what should really happen is reading these resources should get the reader thinking “Wow, there could be a lot more to this than I thought, maybe I should reach out to someone”. For example, one of the considerations I point out below is that where parties agree that a specific law should govern the contract (such as Texas law) there may be certain types of claims that should be an exception to that rule. Which claims are these? And why should they be an exception? You may not know, but an attorney likely will. Moreover, if you’re an exempt organization contracting with the U.S. government, there may be serious obligations you’re undertaking in an agreement and don’t even know. Obligations that, if they turn out not to be true (for example you messed up with quoted pricing or don’t set up a certain book-keeping system) could result in serious consequences. This stuff happens…..alot. And it’s little caveats like this that I see make or break agreements everyday. Things that those trained with foresight will immediately be able to pick up on.***end rant** So for those reasons I want organizations to use insights and resources like the one below but with the understanding that there may be more than meets the eye. Of course, if you’re purchasing brooms or mops then this risk goes down significantly.
- So with that, find a list of “Contract Considerations” below. By no means is this a final document. I’ll definitely try to update this from time to time. And if one of you think of something I should highlight please email it to me.