When you sign a document, you are often signing a legal contract that requires you to do certain things in exchange for what you get in return. Legal contracts are serious business. Here are some tips to consider before you sign a contract:
1. Don’t sign a contract unless you read it first! This is a very basic tip. Just because everyone signs documents from mortgages to rental car agreements without reading them first does NOT mean it is a good idea! Regardless of their content, and regardless of whether you read it or not, if you sign it, you are bound to abide by the contract. Failure to do so can get you sued. “I didn’t read it” is no defense! Read the contract first so you know what you are required to do.
2. Don’t sign a contract unless you understand it. This goes in line with Tip #1. Contracts are confusing and often technical. You are entitled to know and understand what you are signing. Don’t hesitate to ask questions. Remember, “ignorance of the law (or, in this case, a contract) is no excuse!”
3. Assume the other party will insist on enforcing the contract. Sometimes, you sign a contract with a sales person, a local representative or someone with whom you will have a close working relationship. Under those circumstances, it is tempting to think that the other party to the contract is “too nice” or likes you too much to insist on enforcing the contract or suing you if you fail to perform. This is a dangerous assumption and often an incorrect one. Many times, the “enforcer” won’t be the person you are dealing with; it will be their boss or lawyer. If you assume that the other party to a contract is likely to sue you, Tips 1 and 2 become much more important.
4. Know how to enforce your rights under the contract. What happens if someone breaches his or her side of the contract with you? Can you file a lawsuit or are you forced to pursue arbitration? If it is the latter, who pays for the arbitrator? Does the loser have to pay for the winner’s attorney’s fees? Where must the lawsuit or arbitration take place (it is not always in the state where you live or where you signed the contract)? These details are very important, and will be costly if you are not prepared for these costs when agreeing to terms for the contract.
5. Make sure you can comply with the contract. If you aren’t certain that you can do what you are required to do, don’t sign it! It is stressful and expensive to be sued. If you don’t prevail, the consequences of a lawsuit filed against you can follow you a long time.
