Things You Should Be Aware Of While Entering Into A Contract

While litigation may sometimes be your only recourse, many times it is a result of signing a bad contract or not fully examining the contract you have signed.When you enter into a contract, you are entering into a binding legal relationship. Whether you are signing a contract as an individual or on behalf of another entity, there are things to be carefully noticed.



A contract is a voluntary arrangement between two or more parties that is enforceable by law as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of the civil law tradition.  

Things which should be followed while entering into contract.

Parties to the Contract

The Contract should contain full details regarding the parties to contract. Minor, insolvent or unsound mind person cannot enter into a contract. For example, you are entering into an employment contract with your employer then you should see whether the exact and accurate details of the company are given in contract or not.

Legal Nature of Contract

You should understand the legal nature of the contract. Legal nature refers to the type of contract you are entering into and its validity under the law. This will help you to know your legal position. For example entering into an agency, the contract gives you principal and agent relationship.

ContractPicture Courtsey- Google

Laws Governing such contract

Keeping a brief idea of law governing such contract is very important. It will inform you about rights and liabilities and consequences of the breach of such contract or any other irregularity. For example, you are entering into hypothecation contract then there are laws provided in Sale of Goods Act governing hypothecation.

Roles and Responsibilities

Generally, this clause regarding roles and responsibilities is attached in the appendix of contract. So before signing a contract just read the appendix once regarding your roles and responsibilities after entering into such contract. For example in a building contract the manner in which the kitchen, almirah, and windows need to be made and in how much time.

Term of Contract

The term of contract refers to the duration of a contract. Generally, people do mistakes. They sign a contract and then afterward want to release themselves from performing a legal obligation under that contract. You should definitely check once the duration for which such contract will be in operation. For example, you are entering into a service contract then you should check for how many years you are obliged to provide service to that company or any individual.

Risk Involved

You should keep a check on the risk involved after entering into such contract. For example, you are entering into the contract of merger then the risk involved includes failure of the business. In case of various contracts law provide for exorbitant penalties which should be taken care of.

Financial Obligations / Consideration

Any contract without a valid consideration is invalid. So you should check once the monetary or non-monetary consideration of contract. For example in an employment contract whether the salary you have been told is the one which is entered into the contract.

Non Disclosure Agreement

Every commercial contract is accompanied by a nondisclosure agreement or nondisclosure clause. Nondisclosure clause set forth the obligation of parties to preserve the confidential information and trade secrets of the contracting party.So make sure that you check the specific details of that clause and validity of that clause. In case you ignore it, it can get you in trouble and you might be discarded from your job.

Non Disclosure ContractPicture Courtsey- Wikihow

Settlement of Disputes

Lastly, the dispute is the end of every contract. So, before entering into a contract you should check the clause of the mode of settlement of a dispute. In case any dispute arises then, what will be the mode of settlement. This will avoid any future legal problems. If the mode of settlement is arbitration then whether it is ad-hoc or institutional.

To conclude before you sign a contract you need to know exactly what you are signing up for. If you have any concerns at all, you should have the contract reviewed and your concerns addressed by an experienced business lawyer. You should never sign a contract if you are not comfortable with the terms.

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