Q&As: What to Know before Signing a Contract

Q: Do big corporations alter standard contracts for smaller firms?

A: Yes, it happens frequently. But more often the smaller firm just signs the standard agreement that it is given. Depending upon how much another corporation wants your service or product and how agreeable the particular people involved are, you may or may not be able to negotiate deviations from the standard contract.

Q: How can I determine which points are negotiable?

A: Perhaps you can find someone else in your industry who has previously negotiated with the firm in question. If not, you have two basic options. One is to make a formal proposal or counterproposal. The other is to have a more casual discussion. For example, you could say, “I’m used to having the customer pay the freight,” or “For two-year service we add an additional fee,” and listen carefully to what the initial response is.

Q: How can I avoid going to court if a contract is broken?

A: The best way to avoid a court battle over a broken contract is to have specific remedies for specific, potential problems written right into the original contract. A cover for a potential delivery problem, for instance, might be, “The payment will be reduced by a certain amount for every day the delivery is late.” On another level, you can stipulate within the contract that the entire contract go into binding arbitration, not court, in the event of a dispute. In practice, however, you want to do everything you can to avoid getting into a legal battle, especially with a customer.

Q: Do I need to have my attorney read every contract?

A: After you have been in business for a period of time, you will begin to feel more confident in your ability to read contracts. Until then, however, I would have an attorney review every major contract and explain any passages or clauses in minor contracts that cause you difficulty.

Q: What should I watch out for in contracts?

A: Watch out for any items that are inserted into otherwise standard contracts or clauses that show up late in the process. These items may significantly alter the meaning of the contract. This is not an isolated occurrence—it happens all the time. Often, but not always, it is done innocently. Nonetheless, you need to be on constant guard against this problem. Don’t sign anything that isn’t exactly what you thought you were agreeing to. That means when the other party says, “Don’t worry about that clause, we never enforce it,” you should respond with, “That’s great. Then I’m sure you won’t mind that I must have that clause removed.”

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.