There might be a few hidden “traps” in the miscellaneous terms of a contract
“Always read the fine print.”
You’ve probably heard that warning before. But, reading the often difficult-to-understand and obscurely-worded miscellaneous provisions of a business contract can be time-consuming and overwhelming. Additionally, you may decide that it is unnecessary to read the nitty-gritty terms and conditions of a contract if you feel confident that you have a “broad strokes” understanding of your rights and obligations under the agreement.
These are not good excuses.
It is essential to remember that, important qualifications, restrictions and exceptions to the terms explicitly negotiated by the parties are usually buried in the fine print of business contracts. Often, these clauses will be disadvantageous to you as a small business owner. That’s why, when it comes time to sign a written agreement, you must be sure to read and understand the “fine print” as it may, in fact, color your rights and obligations under the contract.
Below are a few “traps” that may be hidden in the miscellaneous terms of a contract.
Hidden fees and penalties
You may feel confident that you understand the payment terms of a contract; you understand the required payment amounts and the dates on which payment is due. However, there may be hidden fees and penalties that you will be unaware of if you fail to read the fine print of the contract. For example, a contract may require fees for late payments, bounced cheques and a variety of administrative fees.
Transfers of risk
Many agreements contain indemnification terms. An indemnification clause is simply a clause whereby one party promises to cover the other party’s losses and expenses if an event occurs that causes harm to that other party. For example, an indemnification clause may state that if a third party sues Party A for any reason related to the contract, Party B will be bound to reimburse any legal fees and other expenses incurred by Party A in relation to the litigation. Basically, an indemnification clause allows one party to transfer their risks under the contract to the other party.
Consequences of the contract’s expiration
If your contract is for a determined term, do you know what happens once the contract expires? Does it renew automatically upon expiry? Or, do you have to send a notice informing the other party that you want to renew? If the contract does renew automatically, how long is the term of the renewal? It is also important to know if any of the other terms of the contract will change if the contract renews. In some leases, for example, upon the expiry of the lease, the tenant can maintain occupancy on a month-to-month basis but at a significantly higher rent.
For further information, you may contact Kelly Francis at (514) 802-7736 or at firstname.lastname@example.org.
Disclaimer: This article merely gives readers an overview of the issues discussed therein and is not legal advice. Please do not take action based on this article alone without first seeking the legal counsel appropriate for your specific situation!