Contracts Demystified
by: June Campbell 
If you are in business, you will inevitably be required to produce or sign
a contract. Although contract language can be confusing, the contract's
purpose is to outline the terms that two parties agree to when entering
a business arrangement. Before signing on the dotted line, there is room
for negotiation and bargaining, but once signed by both parties, contracts
are legally binding.
Having a good contract can save you time and money in the long term.
It isn't necessary to have a lawyer draw up or review your contract, but
in most cases, it is a good idea. Lawyers are trained to identify potential
problem areas that can escape the lay person.
Before visiting your lawyer, do some thinking about the terms that you
want to see in the contract. In your own words, simply write down how
you want the arrangement to be. Decide in advance which terms you are
willing to negotiate and which are non-negotiable. By bringing this list
to your lawyer, you will cut down on billable hours and reduce your legal
expenses.
Contracts contain a minimum of three components: (1) The legal names
of the entities or parties involved and the date of signing; (2) The Definitions,
which spell out the meaning of any terms to be used; and (3) the Consideration,
which identifies the financial (or other) payment that one or both parties
will receive in exchange for fulfilling obligations. Depending on complexity,
the contract may contain many other sub-sections as required.
The Definitions should include:
► The Term of the Contract— Identify the commencement date and
the end date.
► The Territory. Many contracts, especially if covering intellectual
properties such as copyright, use "The World" or even "The
Universe" as the territory.
► Definitions of terms used in the contract, such as "Commission",
"Disbursements", "Gross Receipts", "Net Receipts"
The Consideration should include all "payments" that one party
will receive in exchange for fulfilling their obligation. Example: “In
consideration for the sum of $500, the writer produces a 2,000-word article.”
Additional terms depend on the nature of the agreement. Some of these
are:
► What are the responsibilities and obligations of each party?
► Amendments and Alternations. How can the contract be amended
during its life span? Must both parties agree to changes?
► Termination. What are the terms for ending the contract?
► Conflict Settlement. How should disputes be settled?
► Governing Law. If governing law is stated as the law of your
own state, province, or country, you will save yourself costly travel
expenses if conflict occurs.
► Mutual Indemnity. Include a clause stipulating that either party
will not be held responsible for activities of the other that may be a
breach of the contract or that may occur outside of the contract. For
example, if an artist sells you a digital image as his original work,
but he has actually stolen it from someone who owns the copyright, then
you do not want to be responsible for any damages or legal fees arising
out of that action.
► Transfer. What happens if one party declares bankruptcy, sells
the business, or dies? Can the contract be transferred to Uncle Leroy?
The last page, of course, includes the witnessed and dated signatures
of persons who are authorized to sign on behalf of each party.
June Campbell's writing has appeared in several international print
publications. Visit her site for biz articles, a free gift, books at low
Canadian prices, online sales of proposal and business plan templates
and more. (http://www.nightcats.com)
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