Never sign a contract that you do not feel 100% comfortable with. It can harm your business for years to come. Signing it is legally binding. In a lot of cases, you can't back out after the fact. Even with specific escape clauses, which allow you to legally break the contract, certain conditions must be met before you can do it. It's not always easy.
To avoid a serious mistake, here are some of the key things that you should look for:
1. The contract should anticipate complications
If you find yourself asking "what if" about something that may happen in the future, the contract needs to reflect that, answering your question and offering a solution. It can be simple. For instance, what if the other party does not make a payment on time? Can you break the contract immediately or is there any grace period? Do partial payments count? Can you simply charge an extra fee for a late payment? This is just one example, but you can see why it's so important to explore all potential outcomes.
2. The contact has to be complete
Never sign a contract that is not 100% complete. You need to know all of the terms up front. Even if you talk verbally about something -- such as the "what if" questions noted above -- you should not sign until that is included in the written document. Take your time. Get it right.
3. The contract has to be clear to both of you
When you read it, you should feel like it tells you exactly what you need to know. You should never face confusion or have to make assumptions. The same goes for the other party. Yes, some legal jargon may be necessary, but the end goals and provisions should be as clear as they can be. You never want a contract with hidden clauses or terms that you do not fully understand.
4. The contract should reiterate what you are agreeing to
Again, it comes back to clarity. You never want to sign, thinking you are agreeing to one thing, only to find out that you agreed to something completely different. Make sure the document spells it out clearly, listing all of your obligations and expectations. When you sign, you should know immediately how you have to work toward the completion of that contract.
If you do run into any issues with a contract, either before you sign it or after you do, it is critical that you understand all of the legal options you have in Minnesota. Remember, the entire future of your company could hang in the balance. That's nothing to take lightly.