A busy entrepreneur gets so engrossed in trying to handle all the different things that are required when starting and operating a business.  One major mistake of many first time entrepreneurs is that they sign contracts left and right without ever looking at them.

This can be a fatal mistake in business.  I understand that some contracts are take it or leave it so you must sign them if you need what the contracting party is offering, but in today’s world, there are ALWAYS options and so, at the very least you need to know what you are signing up to.

Here are some real life examples of where trouble can arise if you sign without reading:

1. One client of mine thought he was signing up to purchase $500 worth of supplies from a vendor.  There was a contract provision in his agreement that required a $500 purchase each and every month for 5 years.  Very different business deals. . . but given that he signed the contract, he is now liable for a $30,000 obligation he thought was only a $500 one.

2. Another client struck a relationship to sell her business product to a company at an agreed upon price.  She signed an agreement without reading it. In that agreement, was what is called a Most Favored Nations Clause which states that if she ever agrees to sell the product at a lower price for anyone, she must give this customer the same low price.  This is not fair.  What if she finds a customer who is willing to buy 100,000 of her product so she gives a lower price?  Now, this new customer gets that price as well.

3. A third example is the business owner who signs a contract which contains a noncompete provision in it.  All of a sudden, his business is very limited in where it can sell its products.  He never read the agreement and so now his business opportunity becomes 20% of what it was.

4. Another provision that contracts try to sneak in is the auto-renewal provisions which makes an agreement renew automatically . . .sometimes forever.  In many cases, you will not want to be tied into it forever.  And, having these contracts will affect the way you van grow and do business later.

Bottom Line.  There are many many sneaky provisions put into the fine print of contracts.  Sometimes they are not sneaky but just should not apply to your business relationship.  The ability to grow a business requires that you are always making sure that you are not legally agreeing to things that can hinder you, cause excess liability, create major monetary obligations or otherwise negatively affect your business plans.

The first step to doing this is to read your contracts before signing.  An even better step is to have your business attorney review your contracts so you can at least know what you are signing up to.

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Filed under: Contracts

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