Entrepreneurs often encounter contracts that cover various aspects of running a business. These can be a lease for a building, a supplier agreement or a licensing deal. Regardless of the reason for the contract, it’s critical that the entrepreneur fully understands the terms of the contract before they sign it.
There’s sometimes pressure to move quickly when presented with these contracts, so they should take the time to read through the fine print. One of the most important steps for the entrepreneur to take is to take the time to read through the entire contract line by line.
1: Scope of the contract
The scope of the contract includes all the information about what’s expected from the parties in the contract. For example, it can discuss the exact specifications for a series of social media posts or for remodeling a bathroom. The scope should be comprehensive and clearly outline as much of the project as possible.
2: Payment terms
Payment terms are important because they spell out when each payment is due. This can be set up on a set schedule or it may be tied to specific performance milestones. It should also discuss what happens if payments aren’t made on time and how payments will be handled if the project is delayed or not successfully completed.
3: Non-performance clauses
Non-performance clauses cover a wide range of issues. These terms outline what’s considered a breach of the contract and what situations aren’t a breach of contract. For example, a force majeure clause would forgive non-perforamance for specific reasons listed in the clause.
In some cases, contracts can be complex, so entrepreneurs should work with someone who can assist with determining if the terms of the contract are in the best interest of the business. Careful review may help the entrepreneur to identify hidden obligations before they become significant operational challenges for the company.