When you’re running a business, you exchange contracts all the time.
You’ll have contracts with your customers, your business partners, employees, suppliers, manufacturers and independent contractors.
And, usually, these contracts create legally binding obligations for your business.
With each contract, it’s always important to understand what you’re getting yourself into. You’ll need to determine whether the contract’s terms are clear, fair and tailored to the specific needs of your business.
This is where a Contract Review comes in.
Put simply, these reviews ensure you understand what you’re signing up to.
But exactly why do you need a lawyer to review a contract?
Here are 3 reasons why.
1. A Lawyer Can Tell You The Key Legal Risks And Issues Associated With The Contract.
While a contract might seem simple and straightforward at a quick glance, a good lawyer will be able to identify any legal risks and issues that may be contained within the contract.
Lawyers are trained to interpret law and its implications in practice — particularly if any terms would be deemed ‘unfair’ and therefore void under Australian consumer law.
An experienced lawyer can tell you what looks normal in a contract, and what particular clauses might not look right.
For example, imagine you are a business reselling goods from another business that manufactures the product.
Ordinarily, you’d have some form of a Manufacturers Agreement, which would spell out the terms of supply, delivery, payment, liability limitations and more.
However, the manufacturer may not be clear enough in the contract about their obligations to deliver the supplies in time for your business. Worst-case scenario: this could result in angry customers who haven’t received their products in time because the manufacturer didn’t uphold their end of the deal.
This potential issue could have been solved much earlier on if the manufacturer’s obligations were made crystal clear in the contract.
And, sometimes, when a party gives you a contract, they might have some terms that would seem a little unreasonable.
Under the Australian Consumer Law, there are rules around when a contract term might be deemed ‘unfair’ and could, therefore, be made void. This is where a lawyer’s advice is helpful.
An experienced lawyer will be able to advise you of any key legal risks and issues in a contract — whether it be something that’s missing from the contract or something that shouldn’t be there at all.
2. You Can Understand What The Contract Means For Your Business’ Future.
Beyond just advising you of the risks associated with a contract, a lawyer can also help you understand what a contract means for your business going forward.
Some contracts might automatically terminate at a certain date, and other contracts might continue indefinitely.
Either way, signing a contract binds your business to certain rights and obligations. And it’s important to make sure you fully understand what those are.
For example, you could be running your own freelancing business.
And, often, clients might ask you to sign contracts with particular restraints of trade or intellectual property limitations.
As part of your freelance work, you could have created a software platform for a client, but the contract you signed with them might stipulate that you don’t actually own any of that intellectual property. Instead, that contract could have effectively ‘assigned’ that IP over to your client.
This would significantly affect your business, as often there is ‘existing IP’ in the work you created for them that you would need to reuse for future clients. Having a lawyer review your contract will ensure you don’t give away this important IP through a contract.
Another example is when a contract might contain a restraint of trade clause.
This means you’ve engaged with another business, and their contract with you might have stipulated that you are not allowed to engage with any direct competitors in the industry even after the contract job is completed.
For a small freelancer, agreeing to this term this could significantly limit your client base.
As such, you have to be careful not to sign up to obligations that might affect how you run your business in the future.
So, it’s important to speak with a good lawyer who can walk you through the contract, your rights and obligations under it, and what it means to you.
3. A Contract Review Ensures You Get A Good Deal.
When you’re having a contract reviewed, it’ll involve more than just a lawyer telling you what the contract means for your business.
A good commercial lawyer will also advise you of any key opportunities that can come out of this contractual relationship.
As the lawyer will be familiar with the specific type of contract you’re dealing with and the industry in which it operates, they’ll be able to tell you what you can do to make the most out of this business relationship you’re entering into.
In this way, speaking with a lawyer is a smart business strategy. It allows you to understand what business opportunities may come out of the contract you’re signing; something that can benefit both parties.
For example, let’s say you’re a tech startup preparing to raise capital.
Capital raising can be a really exciting time, and you want to make the most of it by negotiating the best deals with investors.
When an investor gives you a term sheet or proposes changes to a Shareholders Agreement, an experienced startup lawyer will help you understand what these documents mean for your business’ future and if there’s anything else you can do to negotiate a better, mutually-beneficial deal.
Particularly as your startup could have the potential to grow significantly in the future, you want to make sure that you set out beneficial contractual terms from the very beginning so your interests are protected.
Need A Lawyer To Review A Contract?
Whether you’re unsure about a contract you’re about to sign, want to understand obligations you have from a former contract, or are simply not sure what a contract means for your business — it’s wise to have a lawyer step in.
A good lawyer can help advise you of the contract’s key issues, what it means for you, and how you might be able to negotiate a better deal.
While a document might look simple and straightforward, some contracts could be tied to very complex areas of law. Plus, some contracts might have unfair terms which would be void under the Australian Consumer Law.
If you need help understanding the legal ramifications of a contract, we’re here to help!
Come and chat to our friendly team on 1800 730 617, or drop us a line at firstname.lastname@example.org.