Contracts: What do yours say about your company?

Contracts. We use them for a variety of situations, to buy or sell goods or services, and more. But if you are a business sending contracts to a client for a signature, have you thought about what your contract says about you and your business? That’s a question worth considering, and here’s why.

Last week one of my business clients contacted me. They were hiring a consultant for a project, and wanted me to review the contract that this consultant sent over. This business client is smart – they understand contracts are important, and often have me help in writing contracts for them or reviewing and editing contracts they receive for various business relationships. I dug in right away and reviewed the relatively short contract of just a few pages. Then, I had the call with my client to discuss my findings. That call started with something like this, “This contract they sent you is crap.”

As our discussion progressed, I shared some points from my review of the contract, including these:

* the scope of work and cost was very vague and undefined
* the expense reimbursement provisions were incomplete and vague
* the confidentiality and non-disclosure clause should be strengthened to provide more protection for the client
* the limitation of liability section, prepared in all capital letters, almost certainly did not provide the effect that the consultant wanted. Instead of specifying that “Neither party shall be liabile to the other for special damages…” the contract actually said that “Either party shall be liable….” I’m pretty sure that this consulting firm cut and pasted portions from other contracts they have seen into one document to make their own contract. But, they failed to cut and paste an important letter, at least for their side.
* In one paragraph of the contract, the contract defined a key word as one thing, but then defined it as another thing in the next section.

All said and done, we were able to make this work for my client. But it left me, wondering if this consulting firm was the right choice for my client, and that was a point I raised with my client. Maybe they’re great at what they do, but their contract calls that into question when it is actually reviewed.

There is a great lesson here – your contracts communicate a great deal about your company and your business acumen and practice. This particular company obviously did not have skilled legal counsel prepare a basic form contract to use for engagements like the one with my client. But that could have been done fairly easily, and for a reasonable cost. On the other hand, the cost of poor contract practices could be significant. If the poor contract causes just one client to decide not to move forward, how much is then at stake?

So, how are your contracts? If you need a review, or want to discuss how to strengthen your company’s contract practices to present a polished image to your prospective clients, give us a call.