#Contract: Signing the contract - watch outs

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One of the realities of doing business with a large corporate client are usually heavy contracts. Large companies typically require you to sign their contract terms if you want to do business with them and they are rarely as light as the template you may have developed for your business.

Now reviewing this say 60 page document is not an easy task for the uninitiated. Convoluted legal language makes it difficult to decipher what you should be concerned about or challenge with the client. Here are the top areas you should look at:

  • Liability: what is types and amounts of liability do you sign up to? Is there post-contract liability as well?
    • It's very important that you check if your insurance covers the liabilities described and would cover you if you incur them
    • Please note, certain types of liability, e.g. for death are usually uncapped/limitless
  • Insurance: what insurance cover is required - type of insurance and insurance $$ coverage? Required validity and geographic cover?
    • Typical insurance types required in contracts are public liability insurance, professional indemnity, product liability, employers liability, Depending on nature of business, other sector specific insurance may be required
    • Insurance requirements can add to cost, so best to ask for the standards required upfront.
    • You may be required to submit certificates of the actual insurance documents to prove cover.
    • Remember insurance is above all to cover your risk and not just a client requirement. Additional insurance even if not required by client may make sense, such as building property insurance
    • Insurance products available differ by country. In some markets you may struggle to find equivalent local cover
  • Payment terms: How quickly will you be paid after invoicing?
    • Payment terms with large clients tend to be longer and can extend significantly beyond 30 days. You probably have to pay your suppliers and certainly your staff much quicker, so this warrants careful review.
    • Also check the payment schedule, e.g. how frequently you can invoice and if an upfront payment is acceptable to the client.
  • Exclusivity: Are you required to be exclusive to the client in their industry or even beyond?
    • Exclusivity is often part of agreements where you gain strategic insights into the client's business and they want to ensure you don't take this to a competitor (Creative Services, Management consultancy and other). This may also extend to your staff who may need to remain exclusive for a while even after joining another firm.
    • Consider what the exclusivity clause means to your ability to attract a broad enough client portfolio.
  • Termination: How quickly can the client terminate the contract and any specific projects? Do you have the right to terminate as well?

There is of course many more clauses and obligations in a contract, but those are typical clauses that you may want to read very carefully and understand the obligations and risks involved, We'll be touching upon some other legal terms the client imposes in future blog posts.

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