Disastrous mistakes in contracting

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Having worked in the legal industry for over 23 years, I’m often asked what are some of the more disastrous mistakes that I’ve seen clients make in contracting. Here’s a round up of just some of them:

1) Relying on a handshake deal: whether it’s because the relationship is going so well at the start or one stage or another (honeymoon phase, anyone?) or whether it’s because you’ve been mates for so long... or family... or like family. Every contract is there for your worst case scenario and while it’s hard to envisage anything ever going wrong, let’s remember best laid plans... Time and time again I’ve provided legal services where only one party kept up with their handshake deal or the relationship is falling apart and so the other party isn’t adhering to the handshake deal (among other things). Not putting things in writing, upfront can have a disastrous roll on effect.

2) Relying on past experience or a good track record: because surely when nothing has EVER gone wrong in the past, this time round it’s going to be a repeat of the same... right? Many times I’ve dealt with aggrieved parties who can’t believe the hand they have just been dealt because it’s never happened to them before or never happened with this other party. It only takes once bitten to be twice shy and ensure that you never want to deal with a repeat of what’s in front of you. Not taking the time to prepare a timely agreement, upfront is always a risky move.

3) Starting work when the contract isn’t finalised or signed: Pretty much a classic move by the other party. Once you’ve started work even in the absence of a contract you’ve lost a good deal of your ability to put genuine pressure on the other party to hear out your issues and address them to your satisfaction. Near enough isn’t good enough and you could end up being bound to the draft or, as noted above, losing genuine negotiation ability once you start work. Take the time to work out the lead time and time needed to get the agreement right and at least cover off your top/high risks and get them started before the start date.

4) Signing a contract that’s incomplete: Often there are multiple authors or contributors to a contract- someone else is pulling together the attachments or the scope of work or the KPIs and that part of the contract has been blank every time you’ve reviewed it. Point blank you don’t have certainty of what you’re signing up to. Ask for a complete contract. Review it and be sure it makes sense to you and is in the form and contains the terms you’ve agreed to.

5) Not tailoring the contract: The contract is an allocation of risk between the parties. If you haven’t turned your mind to the risks for a contract, you have missed an opportunity to properly allocate the risks and work out the party best to manage and control the risk. If you haven’t tailored the contract, have you even turned your mind to and covered off the worst case scenario for your project or contract? How is this contract going to work best for you? More often than not a short time investment and a brief risk allocation meeting at your end can identify at least your top five risks and you can weave these into the draft contract and look at who is going to bear those risks in the current version. You have an opportunity to make sure you ensure the contract works to respond to your risks and consider the project/contract at hand, rather than hope that your generic template (or the contract you used last time) does what you want when you need it to.

6) Finding something on the internet: Sadly I hear this one too often. “I got this from the internet”- first of all- you don’t own that document. Secondly, you haven’t turned your mind to whether the document assists you, covers of your risks or is even remotely suitable to you. You’re rolling the dice big time with this approach.

At Coutts, we provide practical, simple and focused legal advice and solutions. We can prepare short and simple contracts right up to the most complex. We can advise you regarding any range of things- risks and issues in the whole contract right down to the top 5 risks only. We can conduct risk allocation workshops and prepare tailored contracts. Rest assured, we are here to help and our advice and solutions are always effective, commercial and clear.

For further information please don’t hesitate to contact:

Alexandra Johnstone
Partner
alexandra@couttslegal.com.au
02 4607 2110  

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.