When former President Bill Clinton was questioned by a grand jury about whether or not he had answered honestly when asked if he is having an ongoing relationship with his intern, Monica Lewinsky, he replied, famously, “It depends on what the meaning of the word ‘is’ is.” To his detractors, Clinton was being purposely evasive and disingenuous. But for language purists, as well as for his partisan defenders, the President was being completely honest, because at the time the question was asked, he was no longer involved with Ms. Lewinsky. Cannily, the Commander in Chief was commanding the rules of English in a way which, legally at least, absolved him from culpability.

This historical anecdote is reiterated here merely as an example that demonstrates that in matters of law, precision in language is an indispensable requisite for the fair rendering of justice (or injustice, depending upon one’s point of view).

In the realm of business, precision in language is no less important, as misunderstandings between parties can lead to expensive, time-consuming, and sometimes completely destructive consequences. That is why well-drafted, well-written, and well-understood contracts are always worth the effort. Precise and detailed contracts protect small businesses from having to engage in potentially burdensome legal battles, whose outcome may range from mildly irritating to utterly catastrophic.

All Businesses Enter into Contracts

In its most basic form, a contract is merely an agreement between two or more parties to do or not do a particular thing. More specifically, a contract establishes the professional relationship between parties, the type of services being rendered, each party’s rights and responsibilities, how goods and services are going to be provided and paid for, and how any disputes that arise may be settled.

Most business people enter into contracts all the time. An office lease is a contract. So is an employment agreement, an equipment lease, a bank loan document, an advertising deal, a purchase order, etc., etc., etc. Each contract stipulates expectations and rewards, time frames, remuneration amounts, penalties for non-compliance, and dozens of other accords between the parties. Some contracts are simple, some are complex, and some are all but incomprehensible (try to decipher any modern credit card contract!).

The problem is that, very often, otherwise careful and astute business people merely glance over a contract before signing it, without taking the time to fully understand what the contract obligates each party to do. This negligence is inexcusable as it can put an entire small business at risk. It is important to remember that a contract is a legal document. Its signers are legally bound to each and every term in it, regardless of whether a signer actually read and understood it before putting pen to paper.

So whether you are starting a new business, have an existing business, are looking to buy or sell a business, it is critical to ensure proper review of contracts, so that the terms are fully understood. Contract review prevents issues from coming up later that parties are not able to resolve, and worse have to litigate over.

A Small Business Contract Checklist

Here are some things to keep in mind when reviewing a contract:

• Make sure that all parties are clearly identified and that each party’s expectations, rights, risks, and obligations are concisely expressed. Clearly define the scope of any work or services being performed, define deliverables and payment terms, and how any changes should be handled. Remember: every word in a contract counts.

• Be careful of overly broad language. All terms should be defined as precisely as possible. For example, often the word “timely” is used in contract language, e.g.: “goods must be delivered in a ‘timely’ manner.” Unfortunately, “timely” can mean different things to different people. Therefore, one should always specify exact dates, time periods, deadlines, contract duration, etc. so that there is no ambiguity or misunderstanding.

• Determine how liability and indemnification provisions protect either party from any loss that may arise out of the transaction. Be clear about what acts or non-compliance may constitute default by either party and what remedies may exist if either party defaults. Determine how disputes will be resolved.

• Review the stipulated causes for terminating the contract if it is not working to either or both party’s benefit.

• Make sure that the contract protects any confidential or proprietary information, as well as any intellectual property rights.

• Be careful about any restrictions in a contract that may hinder your normal business operations.

• Finally, have an experienced attorney review all major contracts so that you don’t forfeit important rights or become embroiled in unwanted litigation up the road.

This last bullet point is extremely important. A good contract not only facilitates business transactions, it also must protect your interests so that your small business can continue to flourish. Don’t risk losing it all by signing an agreement that can put all of your hard work in jeopardy.

Contact an experienced Orlando business lawyer to review all of your important contracts with you so that you understand each and every term before signing on the dotted line.