Contracts are the cornerstone of business and life. We sign them every day, from making online purchases to signing business partnerships. Each contract should be carefully read to ensure that there are no terms that can place either party at risk. However, research has found that this is not always the case.
Studies from across the world have found that only 7-10% of people fully read contracts before signing them.
This was highlighted when a UK store tested their online consumers and inserted a clause into their contracts, stating that all online shoppers transferred ownership of their souls to the store, unless they didn’t want to, in which case they could receive a voucher as compensation.
While the above clause was not taken seriously, other contract clauses often are and they can literally be a financial headache for your business if you don’t read the contract carefully before signing. So what are the four liability issues that could arise from not carefully reading a contract prior to signing that could bankrupt your business?
1. Debt Collection Terms
If you are taking out a loan, then ensure you are protected from the lending organization suddenly demanding all their money back, as you would be unlikely to have the funds to pay it back if it has already been invested.
2. Liability Terms
Sometimes things go wrong in business and this can lead to lengthy court proceedings. If you’re a supplier and a client has used your product incorrectly, you want to make sure you can’t be dragged into the proceedings or used as a scapegoat.
3. Financially Liable
At the same time, you don’t want your client or supplier to hold you financially viable should something go wrong with the product and they have to retool or redo work. It is their responsibility to ensure they can use your products and services within their organization and they must front the costs for any rework that must be done.
4. Interest Costs
When taking out finance, you need to ensure that there is a good rate of interest being charged. Sometimes rates can be sky high and this can make taking out a loan a poor choice of investment.
Contracts are legally binding documents. So before you sign one, ensure you read the terms and conditions and aren’t later surprised by a clause that places you at a disadvantage.
Do you always read the terms and conditions? Have you been shocked by an unread clause in the past?
Let us know in the comments below.