How to Review a Contract

These words echoed in my head as I stared at the thick contract in front of me. It wasn’t my first time dealing with legal documents, but this one felt different. It was dense, filled with terms I hadn’t encountered before, and the stakes were high. What I didn’t realize at that moment was that most people overlook the smallest details in contracts—details that can later become big issues. Before signing a contract, whether for a business deal, employment, or even a simple lease, knowing exactly how to review it properly can save you from future headaches. But how do you navigate this maze of legal jargon and ensure you’re not stepping into a trap?

Start from the End: What’s at Stake?

Imagine this: you sign a contract without reading the termination clause carefully. Three months down the line, things go south, and suddenly, you're tied to a deal you can’t easily get out of. Sound scary? That’s because it is.

When reviewing a contract, start with the termination or exit clauses. This might seem counterintuitive, but think about it: you’re probably only reading this document because something significant is on the line—whether it’s your job, money, or property. Knowing how and when you can walk away from the agreement is one of the most crucial pieces of information you need.

Check for penalties: Are there financial penalties for terminating early? What conditions must be met for a legal exit? Knowing this can make a huge difference in the long run.

What Are You Promising?

The next thing you should focus on is the obligations section. What are you agreeing to do? Contracts are a two-way street—both parties have responsibilities. If you’re entering into a partnership or employment contract, make sure you understand exactly what’s expected of you. Look for vague language. Words like "reasonable," "best efforts," or "as needed" can be open to interpretation, often not in your favor.

For example, if the contract says you're expected to provide services "as needed," does that mean you're on-call 24/7? Pin down the specifics as much as possible. If the obligations aren’t clear, ask for clarification or amendments.

Liabilities and Indemnifications: The Silent Traps

This is where many people trip up. Liabilities and indemnification clauses dictate who’s responsible in case things go wrong. Imagine signing a deal and later realizing you're responsible for damages outside your control.

Look for language that could expose you to unnecessary risk. If a contract tries to hold you accountable for things that are clearly out of your scope, negotiate to change it. Be wary of clauses that demand you to indemnify the other party entirely—they may be trying to pass off too much risk onto you.

Confidentiality Clauses: Are You Giving Away More Than You Think?

Confidentiality clauses are a common feature in most contracts, but they can be tricky. Understand what you're allowed to say—and to whom—about the agreement. Are there any restrictions on your communication after the contract ends? Could you be barred from working in a similar field after the contract expires due to a non-compete clause?

For example, non-compete agreements can be dangerous for employees. If you agree to one without carefully reviewing it, you could find yourself unable to work in your industry for a long time after leaving your job. Ensure the terms are reasonable and, if necessary, negotiate for fairer terms.

Payment Terms: When, How, and How Much?

Money is often at the heart of any contract. Make sure the payment terms are crystal clear. How much will you be paid or how much are you expected to pay? When is the payment due? Is there any interest charged on late payments?

If the contract is for a long-term project, are there milestones for partial payments? Protect yourself by ensuring the terms are fair and that you’ll receive payments according to a schedule that works for you.

Force Majeure: The 'Out' Clause

Force majeure is a legal term that refers to unforeseeable events that prevent someone from fulfilling their contractual obligations—think natural disasters, pandemics, or government actions. In the era of COVID-19, force majeure clauses have become a hot topic. If this clause isn’t in your contract, ask for it to be included. It protects you if circumstances beyond your control make it impossible to fulfill your obligations.

Review with a Legal Professional

Finally, and this cannot be overstated enough: have a lawyer review the contract. Contracts are legal documents, and while you can do your due diligence, there's no substitute for a trained legal professional. They can spot pitfalls you might miss and ensure that everything is in order. Don’t rely on your own instincts alone, especially for high-stakes agreements.

In conclusion, reviewing a contract might feel like a daunting task, but with the right strategy, you can protect yourself from future issues. Start with the most critical sections—the exit clauses, obligations, liabilities, and payment terms—and make sure the language is specific and clear. If anything seems off or unclear, don’t hesitate to negotiate or consult a legal expert. Contracts are about mutual agreement and protection, so both parties should feel secure in what they’re signing. Never rush into a contract without fully understanding what it entails, because a few minutes of careful review today could save you a lot of trouble tomorrow.