We all encounter contracts day in and day out in our personal lives. Often, such as with the iTunes terms and conditions, we do not even bother to read them before we hit “I accept”. The importance of clear and carefully drafted contracts cannot be overstated.
What should I be looking for in my contracts?
1. The Parties being bound by the contract are clearly defined.
2. The roles, or promises, of each Party are clearly stated.
3. The contract clearly sets out how to tell if a Parties isn’t fulfilling their end of the bargain.
i.e. What constitutes a “breach” of the contract?
4. The contract clearly states what will happen if a Party “breaches” the contract.
5. The “Term” of the contract is clearly defined.
How long will the contract last? This can be based on the completion of a certain task, or the termination of a certain event or be a set amount of time.
6. The contract clearly describes how, and for what reasons, a Party can terminate the contract before the “Term” is over.
7. The contract states what laws govern the contract.
For example, if you are from Toronto contracting with someone in Montreal, does the contract state whether the laws of Ontario or Quebec govern the transaction?
What are some of the pitfalls of bad contracts?
The contract may not be enforceable.
The point of a contract is to:
- clearly set out the intention of the Parties; and
- to make sure that the Parties do what they are supposed to.
If your contract turns out to be unenforceable, then you lose half the utility of your contract!
Ambiguous terms and conditions in a contract, where it becomes difficult to determine what the Parties intended, can lead to a breakdown of the relationship between the Parties as time goes on. This can lead to expensive and time consuming litigation.
As you can see, you can incur significant legal fees trying to correct a badly drafted contract or trying to enforce a poorly drafted contract. As small business advisors at Erudite Law LLP, we consistently try and stress this to our clients. By having a contract correctly drafted by a lawyer, you may save yourself the time, stress and money of trying to correct something that should have been doing correctly from the start.
If you wish to have your contract reviewed, contact the lawyers at Erudite Law LLP by email at firstname.lastname@example.org or call us at 905-471-6161.