Contracts - Prevention is better than cure


The cliché of “prevention is better than cure” is surprisingly true in the legal context. We are often asked to assist clients who:

- signed contracts they never should have signed;
- did not have a contract, which was written by a “non-legal” person, checked;
- never recorded an oral agreement in writing; or
- did not understand the document they signed.

Contracts come in many forms: a sale, lease or employment contract, service level, non-disclosure, franchise or share-holders agreement. Any commitment which creates rights and obligations constitutes a contract. It can be written, verbal, implied or tacit, and can expose you to rewards and risks.

A contract should answer the “who”, “what”, “when”, “where”, “how”, and “why” questions, throwing in “how much”, and “what if” for good measure. One should try to cover the main elements of your shared intention and issues which might be cause for contention.

Typical problems that arise are that the contract:

1) is vague, ambiguous, inaccurate, confusing, or is simply too long and wordy;
2) fails to identify the parties properly, or to describe the product or price     appropriately;
3) does not set out the parties’ rights and obligations clearly;
4) exposes the parties to unnecessary risks;
5) fails to deal with the various eventualities on termination;
6) uses the incorrect form or type of contract for the transaction required.

As an example, we are seeing a number of “cut and paste” contracts at the moment. Random clauses, “cut” from agreements found on the internet or in other contracts and “pasted” together, are presented as a contract to sign. Often this is to avoid the legal costs.

This is very risky, as the clauses may contain terminology or principles not recognised in South Africa. The contract may not reflect the parties’ true intentions, legislation is ignored, or there are contradictions making it impossible to interpret. The contract could be void and unenforceable right from the start!

The best time to get difficult issues clearly defined is when the parties are keen to conclude the deal. Sorting out disagreements later usually takes much more time and money than if done properly in the first place, apart from any possible damage suffered. This is particularly so where one party has the capacity, stamina or stubbornness to endure a dispute longer than the other.

Next time you enter an agreement, ask a lawyer to check it before you sign, even if only to get a short report on areas of concern. You will then know what you are letting yourself in for. Think of it as going to the Travel Clinic to get your shots before heading out on an adventure. The chances that something goes wrong may be small, but if it does the consequences could be significant.

From the team.
With Energy and with Experience, giving you Expression