How can you avoid the risks of signing a contract without proper review?

1 Understand the purpose

The first thing you need to do when reviewing a contract is to understand its purpose and scope. What are the main objectives and expectations of the parties involved? What are the deliverables, deadlines, and payment terms? How are the risks and responsibilities allocated? You should have a clear idea of what the contract is trying to achieve and how it aligns with your goals and interests. If you have any doubts or questions, clarify them with the other party or seek legal advice.

2 Check the details

The devil is in the details, especially when it comes to contracts. You need to check every clause, term, and condition carefully and make sure they are accurate, complete, and consistent. Look for any errors, omissions, ambiguities, or contradictions that could affect your rights or obligations. Pay attention to the definitions, warranties, indemnities, limitations, and remedies. If you find any issues or gaps, negotiate them with the other party or request amendments.

3 Assess the risks

Every contract involves some degree of risk, but you need to assess whether the risks are acceptable, manageable, or excessive. You need to consider the potential scenarios that could arise from the contract and how they could impact your business, reputation, or finances. For example, what if the other party breaches the contract, fails to perform, or becomes insolvent? What if there are changes in the market, regulations, or circumstances? How would you handle disputes, claims, or damages? You should evaluate the likelihood and severity of these risks and decide whether you can mitigate them or not.

4 Review the attachments

A contract may include several attachments, such as schedules, exhibits, annexes, or appendices. These documents are part of the contract and may contain important information, such as specifications, prices, timelines, or policies. You need to review them carefully and make sure they are consistent with the main body of the contract. You also need to check if they are properly referenced, numbered, and signed by the parties.

5 Seek expert advice

Reviewing a contract can be a complex and challenging task, especially if you are not familiar with the legal terminology, implications, or consequences. That's why it's advisable to seek expert advice from a lawyer, accountant, or consultant who can help you understand the contract and identify any potential issues or risks. They can also help you negotiate better terms, draft amendments, or prepare counteroffers. Investing in professional advice can save you time, money, and trouble in the long run.

6 Don't rush to sign

One of the biggest mistakes you can make when reviewing a contract is to rush to sign it without proper review. This can expose you to unnecessary risks and liabilities that could harm your business or reputation. You should never sign a contract under pressure, without reading it thoroughly, or without understanding its implications. You should always take your time to review the contract, ask questions, seek advice, and negotiate changes if needed. Signing a contract is a serious commitment that should not be taken lightly.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?