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Look for these red flags when negotiating a contract

Effective and enforceable contracts are one of a company’s most important tools. The right agreement can build a solid foundation for a fruitful working arrangement between a company and its vendors, employees and customers. Contracts that are not strategically and knowledgeably created may have the opposite effect, putting fractures in that foundation with costly and stressful disputes.

It is always wise to read a contract before signing it. However, it is also key to have an attorney have an experienced business attorney draft and possibly help negotiate the conditions of the agreement. This guidance can help ensure it is an equitable deal that doesn’t harm profits. It can also help uncover signs of potential future disputes. If the other side is unwilling to address the concerns or negotiate, it may be best to not sign the agreement.

Some red flags that lead to disputes

A bad or unfair contract impacts profitability and puts the company at risk of breach of contract lawsuits or other legal action. Four typical red flags are:

  1. The other party is unwilling to negotiate or compromise
  2. The contract’s terms are too good to be true.
  3. The contract has pre-negotiated price hikes, auto-renewals and other questionable terms.
  4. The contract’s technical details are nonsensical or overly complicated.

Research and prepare

Understanding the people is useful when negotiating. It is often best to look at how they conduct business, treat their business partners and generally conduct business. Learn what are priorities and what is not. It is particularly important to know if they file breach of contract claims at an uncommonly high rate. This process can separate help separate good business partners from unwanted ones bound by a contract.