How to Read and Understand a Contract

28 May
2020

As mentioned in one of last month’s blogs, having a written contract is vital to avoid misunderstandings and potential legal backlash should something go wrong. While that’s all well and good, misgivings can still happen if you have a contract but don’t understand how to read it or the expectations behind the written terms of the agreement. Knowing some ways to help your understanding will be beneficial for all parties in the long-run. 

First and foremost, make sure to not only read the contract carefully but read it twice. A contract legally binds you to your word the moment you sign the document, as that’s proof that all parties have agreed upon the terms set out before the start of the job or agreement undertaken. By thoroughly reading the document twice ( no skimming), you can better ensure that you know exactly what’s expected of you and the other party while finding anything you may not want to agree to do. Once you’ve done that, ask a friend or colleague to read the contract as well, since they could bring a different interpretation of the text that you may not have considered before. 

Take your time before signing. Like previously mentioned, a contract is a legally binding document, and signing because you feel pressured to do so could be detrimental to your business. Taking your time will also give you the chance to find any ambiguous statements that could be twisted against you and ask the other party questions about something you don’t understand or agree with. Limiting the risk of vague terms that are open to interpretation will save you should something occur later on that can’t be avoided. If there’s a term you don’t agree with, make sure to have the contract changed completely with the newly agreed-upon term rather than relying on a verbal agreement. Unless you have it in writing or as a recording, a verbal agreement won’t hold up in court. 

If all else fails, ask for the contract in plain words to help better your understanding or, if complexity is necessary for the contract, consult a legal expert to go through the document with you and find anything that may be amiss. Should you choose to consult a legal expert, warn the client of the extra charge that will be placed on them. If the contract must remain complex, they should understand (though, of course, never make assumptions). 

Even after all of that, if you still have doubts, then do not sign the contract. No job is important enough to ignore any legal ramifications that may come from loopholes in the paperwork. Keep your business and yourself protected; when both parties are assured in their mutual agreement, their working relationship will go far more smoothly than one clouded in doubt. 

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