In this article we talk about a few things you can do to manage risk when it comes to contract preparation, negotiations and execution.
Checklists are generally a good start. Checklists should suit the nature of the contract in question. For example, a checklist for a contract for the purchase of residential land would hardly be relevant to a construction contract. Even a very experienced lawyer benefits from a checklist; they cause us to think about issues which we may not have otherwise thought about due to perhaps time constraints, workloads or client expectations / demands.
Read the Contract. Be wary of being pressured into signing something or being told that it is just a standard contract, sign here. An unfortunate situation that I see far too often is the signing of the contract without first reading it. Pay particular attention to warranties, indemnities and the costs associated with insurance obligations.
Ask questions. One should never be afraid to question the meaning of a term or circumstances surrounding the transaction. The answer to those questions may cause you to reflect on the wisdom of proceeding with the transaction.
Precedents. Do not over rely on precedents or industry accepted contracts. Precedents are a necessary tool as they increase efficiency and decrease the risk of omitting a term from the contract. Precedents also (if not used properly) increase the risk of over reliance and disregard for the contract terms. Industry accepted contracts such as the Construction Contracts and the REIQ Contracts are the preferred contracts of choice and they should be for lots of reasons. First and foremost, a lot of intellectual effort has gone into developing a contract which is suitable for particular industry groups. Secondly, such contracts are familiar to the parties concerned. Having said all of this, again one cannot be blasé about their use – they still contain warranties which may be unacceptable, indemnities which may need to be negotiated and insurance obligations which need to be assessed.
We can assist you with reviewing and negotiating your contract. Contact us on 47 24 1016 to discuss your contract issue.