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Reviewing and negotiating your own contracts? Save your records.

Many small businesses run on lean budgets and limited personnel.  That means in addition to running the business, you may also be its bookkeeper, IT expert, head of human resources, butcher, baker, and taco maker.  When faced with reviewing and negotiating contracts for the business, like everything else, there are two choices: handle it in-house or hire an expert, like a contracts lawyer.  If you are adding Contract Czar to your list of job titles, make sure you’re at least saving your records.    

This goes beyond just saving copies of every agreement you sign.  If you are negotiating contract terms with the other party prior to signing, you should be documenting those discussions.  Likewise if you and the other party are discussing how to interpret the contract’s terms after signing, those exchanges should be documented as well. 

Why?  Those records can be very helpful if the other party says the terms mean one thing today and a different thing later.  By producing records to the contrary, you are producing evidence of that party’s original intent behind those terms.  This alone may resolve the disagreement.  If it doesn’t, then your records can be useful in court if it comes to that.  The Wisconsin Supreme Court has made clear that if the terms of a contract are ambiguous, they will look to extrinsic evidence to determine the parties’ intent and then enforce the contract accordingly.  If you have records showing the parties’ intent, then you have evidence a court could find persuasive.   

Sometimes the pitfall isn’t saving records, it’s creating them in the first place.  Email is a great record-keeping medium because emails are easily savable.  If conversing by phone or in person, it’s a good idea to send a follow-up email that summarizes what was agreed to, and requests the other party to either confirm or provide clarification if necessary.

Creating records includes documenting the agreement itself.  For the most minor of deals, an email follow-up summarizing the agreement at least provides a written record.  However there’s a lot of upside to reducing the entire agreement to a written contract.  It proves an agreement exists in the first place.  It can also add clarity to each party’s obligations, address a variety of potential scenarios, and include remedies if a party doesn’t follow through.  On a psychological level, parties are more likely to follow through if their promises are written down and signed by both sides.

Of course, hiring a contracts lawyer relieves you of the tasks described above.  But if you are the one reviewing and negotiating contracts for your company, then your long list of job titles will need to include another: record-keeper.

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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