Ideally, you should have an attorney look over any agreement you’re presented with or plan to present to someone. However, if you cannot afford a lawyer and must read over a contract yourself, here are three things you should look out for.
1. A Way to Get Out
When you are handed a contract immediately scan to the last sections and read the termination section. Be sure that the ability to get out of the contract is mutual and reasonable.
2. The Specifics of How to Get Paid/ How Long You Will Have to Pay
When you are expecting money from a contract look for specifics such as how many days the person can wait to pay, whether the time period is calendar or business days, and method of payment. If you are the person paying, (giving a percentage) it is especially important to take note of how long the contract lasts and and what items/services the person will get a percentage of. A red flag should be raised immediately if the contract states that a person has a perpetual right to a percentage of something. Most contracts have sunset clauses that reduce the right to the percentage years after the contact ends.
3. Contradicting Language
The biggest way you can hurt yourself is to not completely read through a contract. A section in the beginning that seems in your favor can easily be negated by a clause later on in the contract (even at the end of the same section). Look for phrases that refer back to other sections and reference them for contradictory language.
The purpose of this article is to foster an open dialogue and not to establish firm policies or best practices. Needless to say, this is not a substitute for legal advice. In any particular case, you should consult with lawyers experienced in the field you are in and licensed within your state. Depending on your specific situation, answers other than those outlined in this blog may be appropriate.