How to Review a Contract
Check twice before you sign!
The Houston Business Lawyers help clients in Texas who are in need of business law representation. Call (832) 509-0445 for a free consultation.
The Contract Review Checklist
A contract is a document memorializing the set of terms mutually assented to by the parties to the alleged document or contract.
- Offer and acceptance;
- An intention between the parties to create binding relations;
- Consideration to be paid for the promise made;
- Legal capacity of the parties to act;
- Genuine consent of the parties; and
- Legality of the agreement
An agreement that lacks one or more of the elements listed above is not a valid contract.
Most Contract Attorneys Will Help You Do the Following…
- Negotiate the Terms: When presented with a contract, remember that this is a starting point. You want to make the deal happen, but so does the other person. Ask for what you want. The worst that can happen is they say “no.” Remember your business hat: risk v. benefit and the like analyses.
- Identify the Parties: Correctly identify the parties, entities, officers and proof of authority to execute and obligate all business entities.
- Complete all Blanks that are required for a valid contract.
- Review and understand any Automatic Renewals and notice requirements; for a change in terms.
- Assist in allocating risk: Determine how risk is to be allocated. Risk is typically borne by the party in the best position to prevent loss. However, there may be reasons for a different allocation. In that regard, you may also need to…
- Check insurance requirements. Will you be able to obtain the required insurance within your budget?
- Draft necessary Harmless and Indemnification Provisions: You should always ask your attorney about the need for hold harmless and indemnification provisions. When you agree to hold someone harmless you are agreeing to not hold them responsible for liability that may arise out of the transaction. When you indemnify someone, you are agreeing to protect him from liability or loss that may arise out of the transaction. If you must indemnify the other party, limit the indemnification provision as much as possible. Negotiate the same indemnification for yourself. For instance, if you, as buyer, agree to indemnify the seller of a business for losses they may incur as a result of actions after the sale, then they should indemnify you for losses you may incur as a result of actions before the sale.
- Ask your attorney to help you review and understand all Incorporated Documents, i.e., documents that may be attached to, and a binding part of, the Agreement.
- Your attorney should help you define, understand, and draft the Events of Default. Determine what acts constitute events of default and whether you are able to enter into and perform under the contract without causing a default. Also consider what should be included as events of default by the other party. Protect yourself and your business.
- A good contract will also define any “Remedies Provisions” for events of default.
- Define the Causes for Termination – for you and the other parties.
- Make a record of all Dates and Deadlines. Keep a calendar and a back-up method such as another person or second calendar.
- Draft the Warranties and Representations section of the Agreement. Be careful what you warrant and represent as well as the period of time (Statute of Limitations)! Require the same from other parties. Look for limitations, disclaimers and exclusions (all should be reviewed by your attorney).
- Rights and Responsibilities – Know all of your rights and responsibilities under the contract. Carefully read the entire contract because rights and responsibilities are typically scattered throughout the agreement.
- Resolution of Disputes: Determine how you want to deal with resolution of disputes. An arbitration or mediation requirement could ultimately save you lots of time and money. However, there are times when you may need to go to court to resolve the dispute. When appropriate, try to give yourself some flexibility.
Double Check the Business Terms
Double check the business terms of the contract (price, amount, duration, square footage, etc.) to determine whether it accurately reflects the agreement of the parties.
If there is any legal matter you would like assistance with or further consultation on, Please contact us at (832) 509-0445.