Red flags you should watch out for in contract negotiations7 min read

Brymo is a Nigerian artiste with a number of hit songs, remember Ara mbe? Or Good morning?

Definitely beautiful singles. But… we digress. Remember he has been at war with his previous recording label Choc city?

Much so that they sought an order of perpetual injunction restraining Brymo from breaching the terms of their Exclusive Recording Artist Agreement, as well as N100 million as damages.

You are probably wondering what went wrong with that contract or if the dispute could have been avoided?

Something went wrong for sure, but you can reduce the chances of something going wrong in your own contracts with the red flags you should never ignore.

First question to clear: Does, scribbled words on a paper towel count as a contract?

Yes! Written words on a paper towel is a valid contract. You just have to make sure it contains the important/key aspects.

Here are the top “Man this doesn’t feel right” flags you should watch out for in your contract.

RED FLAG 1- Insisting that no contract is needed.

Whoa! Tell whoever you are negotiating with to stop right there.

In the Nigerian setting, it could be you going into business with family or friends. It is likely that at some point, this will be suggested. You owe it to your future self to rid yourself of all avoidable heartaches.

No matter how well you know a client or partner, or how simple a project or business deal appears to be, you ALWAYS need a contract to set things straight.  If someone is not willing to sign a contract with you in the first place, it could be an indicator that they are looking to pull some weight or renege on your agreement.

Fix it: You, (The ambitious entrepreneur, freelance writer, website developer, or a trader) need to stand your ground and make sure there is a DULY SIGNED agreement in place. Not to worry about too many legalities, your contract does not have to be long and fancy, simplicity is your friend. Take for instance the paper towel contract.

RED FLAG 2- You are not sure who the parties are

Take for instance:

Zainab is in discussion with Babo Event Planners. Zainab wants them to plan her wedding. But she asks for a contract (A very wise woman!).

She does get a contract but it lists the party involved as Babo and sons Catering. Zainab is confused. Is Babo Event Planners the same company as Babo and sons Catering? She sends a mail asking for clarification but they tell her not to worry, after all there is something the two names have in common- Babo!

Big red flag!

Having no clear idea who the parties are will leave you with no clear picture of who the parties are and who is responsible for performing the obligations stated in the contract. Importantly, who do you have legal rights against if things go south?

Fix it: You need to identify the business you are dealing it by its correct legal name. This includes the suffix in the name such as whether Limited or LTD.

Doing this will help you avoid confusion and identify corporate officers as such.

RED FLAG 3- Woozy payment obligations

There is no clear indication of  who is paying who and what is being paid. Money is a contentious issue and unfortunately for mankind, it’s going to remain so.

If there isn’t any mention of when payments must be made, and the conditions for making payments, your red antennas needs to go off… loudly!

Don’t play with your money 🙂 .

Hear that again, Don’t play with your money!

Fix it: Make sure everything about payment and the responsible party is listed as simply as possible.

If the money will be paid in installments or after the work is completed, say so and even go ahead to list dates, times and requirements. You should include the method of payment as well.

RED FLAG 4- There are no circumstances that terminate the contract. What?

Another big red flag! What this means is there are no clear cut terms on why and how the contract could be ended stated in  the terms of the contract, unless maybe you head to court, but who wants that?

For instance if one party misses too many important deadlines or blatantly flouts the conditions of agreement, you have every right to want to discontinue your dealings with each other without the hook of “violating your agreement”.

If there is no provision of ways in which you can terminate the contract, you need to do something about it.

Fix it: Review the causes for termination and include ways to terminate the contract if things aren’t working to your benefit or as planned. It makes a lot of sense to set out the circumstances under which either party can terminate the contract.

RED FLAG 5- It might sound silly, but if you get a contract with mismatched font type and size, you shouldn’t overlook it.

We’ll explain why.

It could be a sign that the document was copied and pasted from multiple sources literarily meaning it’s what we call “ a patched work”.  The other party hasn’t put much thought into drafting the contract which probably means they haven’t paid much attention to it after all.

Fix it: Here’s where you take charge. They might have showed unseriousness towards your contract but they have played right into your hands.

So? Send over your own document. It’s way easier to negotiate and agree on terms when you know every tiny detail of the contract- and you will because you wrote it.

RED FLAG 6- Completely bogus and unreadable legal terms.

Hey, we are assuming you aren’t a lawyer, so you don’t have to put up with jargons you do not understand. We get it, some people are impressed by how many “big words” are present in a contract, it gives it an air of importance.

Truth is, it could hurt you on the long run. What do you need headaching legalese like “heretofores” and “thereinafter” for in the first place?

Whoever said simplicity wasn’t cool?

Fix it: Keep it simple. Ensure your contract has short sentences with numbered paragraph headings that will allow the readers understand what each paragraph entails.

RED FLAG 7- There’s no provision on resolution of conflict.

You need to know what you or the other party will do if something goes wrong right? If you don’t get it right in the contract, again it could mean playing with your money. If you avoid going to court, it could ultimately save you lots of time and money. Though there are times when you may need to resolve the disputes in court, wouldn’t it be nice if you could just avoid it when appropriate?

Fix it- Write it in clear simple terms what you and the other party will do if something goes wrong. You can also decide to handle your dispute through arbitration or mediation instead of the expensive court processes.

RED FLAG 8: Recurring exaggeration or untruthful statements.

This is not something you should ignore. If the party you are entering into a negotiation with, keeps changing facts about its capabilities or experience, this may be an indication that they something’s probably wrong. They may not be forthright in the negotiations or it could be they are hiding something that may eventually come out to haunt you.

Fix it: Make sure the other party clearly states in bullet points what needs to be done by them. If this keeps changing, it might be better to call for a meeting to address the issue, or in extreme cases call off the negotiations until things become clearer.

What other red flags do you think we missed? Share with us in the comment section.