Legal contract pitfalls: what to look out for

February 9, 2016

Throughout life, be it personal or business-related, you will invariably need to handle contracts. These may be between you and a client, a supplier or an employee. Regardless of the type of contract, make sure that you avoid these common pitfalls before you sign on the dotted line.
Writing your own contracts

It can make perfect financial sense at the time to write your own contracts rather than draft in a solicitor or other legal body. But if you omit necessary details, or leave loopholes exposed, you may end up losing money in the long run. Also, beware of using the contract as a marketing tool. Any clause that could be construed as misleading or exaggerating may bring the entire contract into dispute, and you may be forced to pay compensation to the other party.

If you feel comfortable writing your own contracts, ask an independent party to read through them to check for any mistakes or missing clauses.

The nitty gritty

When you check a contract, be as pedantic as possible. Any small mistake or omission could be used as a loophole in the future, so ensure that each and every detail is in place. Some questions to ask yourself are:

• Are all parties’ names spelled correctly and in full?
• Is there an ‘effective from’ and (if applicable) ‘end’ date?
• Are all financial provisions clear?
• Are the obligations of each party clearly written and easy to understand?

If you have any concerns, speak to the other party before signing the contract. The Money Advice Service can assist you if you feel that you’re being asked to sign something that isn’t up to scratch.

Beware of hidden dangers

It isn’t paranoia. There are always people who are willing to fool you into agreeing to a contract or term without you realising it. It doesn’t necessarily have to be signed to be agreed upon – sometimes a verbal agreement is all that’s necessary. Also, ensure that any sensitive information is protected and that the other party is expressly warned against poaching your customers or employees.

If you don’t feel confident about a contract, take a step back and analyse it. Never be afraid of negotiating. Remember, a contract is a legally-binding document. Consult the Citizens Advice Bureau if you think you’re being unfairly treated or forced into signing a contract.