What to Check Before Signing a Business Contract: 3 Essential Tips

Contracts are the backbone of any business. They define legally binding agreements between two or more parties and govern everything from partnerships and transactions to employment and service delivery. In fact, a business is essentially a network of contracts - with the state, suppliers, clients, financial institutions, and more.

Because contracts are so common, it’s easy to overlook the fine print. But signing a contract without fully understanding its terms can expose your business to serious risks. Here are three critical things to look out for before signing any business contract.

1. Does the Contract Clearly State the Benefits to Your Organisation?

Before signing, ensure the contract explicitly outlines how your business will benefit from the agreement. This includes:

• The value exchange between parties.

• The deliverables and timelines.

• Any exclusive rights or protections your business receives.

If the benefits are vague or one-sided, it’s worth renegotiating or seeking legal advice before proceeding.

2. Are All Costs, Including Contingency Costs, Clearly Defined and Accepted?

Contracts often contain hidden costs or clauses that only become relevant under specific circumstances. These may include:

• Penalties for early termination

• Fees related to insolvency or breach

• Maintenance or renewal costs

Understanding the full financial impact of a contract is essential to avoid unexpected liabilities. A thorough contract review can help uncover these hidden terms.

3. Is the Termination Clause Clear and Fair?

Every contract should include a termination clause that explains:

• How the agreement can be ended

• Under what conditions termination is allowed

• What notice period is required

A well-structured termination clause protects your business if the relationship no longer serves your interests. If the clause is overly restrictive or vague, it could lock your organisation into an unfavourable agreement.

Why Contracts Can Be Difficult to Understand

Many contracts are lengthy and filled with complex legal terminology. This can make it challenging for business owners to fully grasp the implications of what they’re signing. That’s why working with legal consultants - such as Akin Business Constructs - can make a significant difference. They help ensure your contracts are not only legally sound but also aligned with your business goals.

Final Thoughts

Contracts are powerful tools - but only when they’re used wisely. By carefully reviewing the benefits, costs, and termination terms, you can protect your business from unnecessary risk and ensure every agreement works in your favour.

Before signing your next commercial contract, take the time to consult with legal experts and make sure every clause supports your business’s best interests.