Contract Catastrophes: Top Mistakes to Avoid in Your Contracts
Failing to read or understand the terms of the contract before signing
One of the biggest mistakes you can make with a contract is not reading it thoroughly before signing. It can be tempting to rush through the process, especially if you're excited about a new business opportunity or anxious to get a deal done. But failing to understand the terms of the contract can have serious consequences down the line. Take the time to read the contract carefully, and don't hesitate to ask questions if there's anything you don't understand.
It is always advisable to seek for legal advice before signing a contract, but in case a company is looking to save some money from legal costs or the contracts are standardised, then AI can be of help. On Agrello platform you can now ask anything about the specific contract from our AI-powered Codriver, who is your personal assistant, hired to help you make sense of even the most complex contracts.
Not defining the responsibilities clearly
Contracts should clearly define the responsibilities of each party. Not clearly defining responsibilities in a business contract can lead to a bunch of issues, including delays in product or service delivery, payment disputes, and even legal battles. When drafting a contract, it's essential to ensure that all parties understand their responsibilities and obligations. This can be achieved by clearly outlining the scope of work, delivery timelines, and payment terms. The contract should also specify what happens if either party fails to meet their responsibilities. By defining responsibilities, the parties involved in the business relationship can avoid misunderstandings, maintain trust, and ensure that the agreement is executed as intended. It's crucial to be as specific and measurable as possible in defining responsibilities, as this will help ensure that the contract is enforceable and can hold up in court, should any issues arise.
Copying contracts from previous agreements without review
Often times a generic pre-defined template will be sufficient to enter into an agreement without consulting a lawyer, but the contract still needs to be filled in with attention to detail. A common mistake in this case is copying contracts from previous agreements without carefully reviewing them to the specific business relationship at hand. Sometimes confidential information about a previous business relationship can be left into the contract text which is not meant for the eyes of your next business partner. Situations like these can lead to ambiguity, misunderstandings, and potentially costly legal disputes.
By using a contract management platform like Agrello, you can make the creation of standard agreements more convenient. On Agrello it’s convenient to create standard agreements from templates that you have prepared and uploaded. This way you can be sure that a template is always clear from unwanted data and it can be entered onto a fresh contract. It’s also possible to bulk create multiple contracts at once, if there is the need to prepare many documents for signing.
Not keeping track of contract expiration dates or renewal terms
Contracts typically have an expiration date or a specific term. In the case of businesses, not keeping track of contract expiration dates can have severe consequences. Failure to renew contracts with important vendors, suppliers, or clients can result in supply chain disruptions or lost business opportunities. It can also result in costly legal battles if one party fails to uphold their contractual obligations due to a missed deadline or misunderstanding of renewal terms.
To avoid these issues, it is important to keep track of contract expiration dates and renewal terms. This can be done manually by setting reminders or using a calendar, or through the use of contract management software that can automate the process, such as Agrello. Use Agrello reminders on our platform to stay on top of your contract deadlines and terms and ensure that you are getting the best possible terms and avoiding costly mistakes.
Not organising your contracts effectively
Reminders are a great feature to keep you on track with expiring contracts, but keeping everyone on the same page and organising your contracts is also key to navigate through contract lifecycle smoothly. It is still too common, that important documents get lost in the bottom of someone’s mailbox or personal computer folder. Considering that, it’s best to store documents in a single environment, where everyone can have access to the necessary documents. Managing access rights to the documents needs to be simple and controllable. We have written a longer piece on how Agrello can help streamline contract collaboration for larger teams here.
In conclusion, contracts are an important aspect of doing business, but mistakes can happen. By taking the time to read contracts thoroughly, clearly defining all responsibilities, using technology to automate contract creation, keeping track of expiration dates and renewal terms and organising your contracts effectively you can avoid some common mistakes related to contract management. Remember that a little bit of extra effort upfront can save you a lot of time and headaches down the line.