Analyzing Contracts

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Use the following list of questions as a basic checklist of issues to consider before entering into a contract.  This is not, by any means, an exhaustive list of all possible issues that may arise.  It does, however, provide a general look at the core issues important to virtually every contract.

An attorney should be consulted whenever the amount of money or liability at risk warrants the cost of hiring an attorney.  This is true, even if insurance would hypothetically cover a contract.  That is because insurance companies often refuse coverage or have policy limits that won't cover the anticipated risks, which leaves the strength of the contract as your last line of defense.

That said, the most important reason to think through the issues below is that a contract makes a far better preventative tool than it does an enforcement tool.  In other words, you want a detailed contract in order to ensure you and the other party are on the same page about what is going to take place.  That is why contracts are equally important when making deals with relatives and friends as they are when making deals with strangers.  It's all about clarifying communication, values, vision & expectations, so that there are no hard feelings and disappointments. 

Questions worth asking before any contract:

1. Who is paying for what?

2.  What do you need the other party to do?

3.  What are you willing to commit to doing?

4. How long will the relationship last?

5. Under what circumstances will you be able to terminate the agreement, or can the other party terminate the agreement?

6. Are warranties being offered, and do you need to disclaim default warranties?

7.  Who should bear the risks of lost or stolen items?

8.  Who should bear the risk of liabilities from third parties?

9.  Should you try and limit liabilities that otherwise might exist?

10. If intellectual property is involved, who will own it?

11.  What quality control standards should apply?

12.  What remedies do you need if the other party doesn't do what they've promised to do?

13.  Is it necessary to get assurances of confidentiality or promises not to compete? 

14.  Is there anything in the contract that forces you out of compliance with other agreements you have?

15.  If there is a dispute, how should it be handled, and where?  Should you require mediation or arbitration ?