Always Read Business Contracts

Thursday, 22 January 2009 at 3:00 am Pacific USA Time.

As I speak to more and more people on the phone, I hear things like, "I don't like contracts," or "I don't read them anyway," or "The last guy I worked with didn't even have one." And if they're calling me, they're unhappy with that guy, and may have little they can do since they have no signed agreement. What was promised, what you're paying for, whether you get your money back or not… it's all he said, she said without good, signed documents.

This week, a guy on the phone told me he doesn't bother with contracts because if something goes wrong, he just forgets the money loss and chalks it up to lesson learned. Well, the lesson learned should be HAVE A CONTRACT NEXT TIME! You may have to kiss that money goodbye, but contracts are still very important.

I have seen contracts that say that your vendor owns all the work he does for you… that would stink. I have seen contracts that say that if you have a problem with the vendor, you cannot sue them for more than $1. I knew a lot of people who had a problem with that company last year, and they were all stuck with no resolution they liked because they had agreed to a contract with that clause. Some contracts say you can't sue at all… you have to go for arbitration. That's why having and reading a contract is important!

It's like an insurance policy. You get it and you hope you never need it. Here are the steps for making sure that this is the company you want to work with.

  1. Ask for their contract. If they don't have one, or just want to email you some terms, I wouldn't accept it. Any professional company will have a contract.
  2. Read the damn thing! Read it, ask questions about it, show it to a lawyer if you need to. But don't just sign it since you have no idea to what you're agreeing. Do not assume that the contract is fine because it looks like a nice legal document. Make sure it protects YOU. You wouldn't buy an insurance policy that didn't have the protection and coverage you needed!
  3. If you don't agree to the terms, don't sign it. Don't give the company any money. Don't make any payments. If you don't like how they plan to do business with you, just pay nothing because you may not get it back. Here are two stories illustrating this:
    1.  A friend of mine recently put a security deposit down on an apartment without signing anything about what does that money go to, what happens when she moves in, and what happens if she never moves in. Well, she ended up picking another apartment, and signing their lease. She expected the first landlord to give her her money back, and the woman wouldn't. Many landlords do this… they are out money from taking that apartment off the market to hold it for you, so they keep security deposits, even when you don't move in. And without any signed paperwork saying she gets her money back, she wouldn't have had any legal recourse there.
    2. Similarly, I moved recently. I found an apartment online, but wasn't ready to sign anything since I hadn't seen it. They wouldn't hold it for me unless I gave them $1500 as a security deposit that they would COMPLETELY keep if I ended up not taking the apartment. So I gave them nothing, and I signed nothing. And just as I was counting on this apartment, they called me to say they gave it someone else.They had that right! I later saw the neighbourhood, and am glad I didn't give them the $1500. I would have not taken that place, and I would have forfeited that money.

This is another situation where watching Judge Judy can clear things up. :) Ever see a case where someone lends someone else money that never gets paid back, and the guy who got the money says it was a gift? Well, without paperwork saying it was a loan, it's going to be hard to prove to any court (real or TV) that the intention of that arrangement was for the money to be paid back.

If you have no paperwork saying what this company is doing for how much money, and what happens if things go bad between you, you may not have much to show in court. You may feel wronged, but like the guy I spoke to, you may have to kiss that money goodbye and learn a valuable lesson about signing a contract where you agree to the terms.

These aren't emotional issues. These are business issues, and a court is not going to ask you how you FEEL about this. It's business, and has to stand up in court with no feelings attached. Sometimes, you may feel in the right, but the law may not be on your side. A fair contract that both parties can sign can help the law be on your side when you feel in the right.

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Categories: That's Good Marketing

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