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Four “red flags” of a bad business contract

Contracts are an essential part of doing business. It will outline agreements between businesses, businesses and clients, businesses and employees, and the list goes on. Contracts that are not strategically drafted to foresee potential areas of dispute, create loopholes, or outline unfair terms that can be more harmful than beneficial, leading to costly and stressful disputes.

It is common sense that people should read a contract before signing it, but it is also essential to have an attorney draft or review necessary business contracts. This outside guidance ensures that agreements are equitable and fair. A lawyer can identify red flags that could later create unnecessary disputes or contract breaches that could affect the business’s success.

Far from causing problems, identifying issues ahead of time enables parties the chance to resolve the issues together, providing greater clarity to the business relationship. If negotiations are unnecessarily complex, there is still time to reevaluate before signing.

Common warning signs

A bad contract can feel like an anchor around the neck of a business. Common warning signs of a bad contract include:

  • The contract includes auto-renewals with predetermined price hikes or dubious provisions.
  • The other party does not negotiate valid concerns in good faith.
  • The contract is unnecessarily complicated or overly technical.
  • The contract’s terms are too good to be true.

The rules of engagement

Hammering out a binding contract can take time and skilled negotiation. However, going through the process can strengthen the bond and provide insight into the other side’s way of doing business, their priorities and how they handle disputes. If a fair deal is struck or the contract is acceptable at the outset, all parties can confidently move forward.