Saturday, August 29, 2009

The making of contracts: common pitfalls you should avoid.

The law of contracts can be rather much of a conundrum to the ordinary person who merely wishes to create a binding agreement for the purpose of enterprise or to safeguard the rights and responsibilities of parties in the ordinary course of living. They are not alone since admittedly, it can become complex and perplexing to even the most senior practitioners of the law at times. This is not merely because it is in itself a complex area, but because of the seeming propensity of human beings to create from the simplest circumstances, convolutions which would confound the gods. It is hardly surprising therefore that so many persons end up in litigation with the hope that a neutral third party or judge will unravel their problems for them. In some instances it becomes necessary for there to be enforcement of a contract as ordered by the court where a party refuses to honour his part of the agreement, or where a clause is unclear as written and needs judicial opinion to declare its meaning. In addition further difficulties are caused when a party seeks to reserve all the benefit of an arrangement for himself and attempts to construct an agreement along those lines. Often such an individual may resort to trickery to attain those ends.
For example, if party A wishes to purchase a vehicle from party B and offers B a price which is below the market value of the vehicle, he may add as if it were some benefit, the offer of paying the necessary taxes to the Inland revenue department. B being ignorant of the relevant rate of taxation for such a transaction may well agree to such an arrangement only to realise later that he did not receive his worth. Some will argue that A merely executed good business sense and that B ought to have done his homework before agreeing to such a deal, others will call A a brass faced swindler. The law however, has as part of its requirements that each individual must be careful to be mindful of their business affairs, and so B having concluded that contract with A may well have to abide by the consequences since he made the contract of his own free will without any illegalities being attached to the circumstances of its making. Imagine what happens when two or more parties try to outdo each other.
Simple contracts very often find themselves subject to dispute and the more complex ones such as partnership agreements even more so simply because there may not be strict adherence to a few commonsense rules which normally can aid those wishing to get involved in the making of a contract. I must first advise that an agreement between two or more persons does not constitute a binding contract until certain other conditions are fulfilled, though an agreement in some instances can be binding. I will deal with the law of contract in some detail in another article which will explain some of the intricacies in plain language and the statements made above.
One pitfall in making a contact is uncertainty or complete ignorance about what you are getting. As in the example above B was either plain careless as to the details of the transaction or he did not mind the amount he was to be paid for the vehicle. If you are the one proposing the contract since you wish to acquire goods or services, determine how much you are willing to pay and leave room for negotiations. If you are getting involved with a standard form contract such as on for utilities or services ask the question, are there any ancillary responsibilities attached? For example, will I be required to pay monthly bills or installments, is there any interest attached, if so how much?
Next ask the question, what are the seller’s or service provider’s responsibilities to me? Should my equipment become defective or cease to function, who pays for the repairs or the replacement?
Equally important, is the issue of ending a contract, since many service providers attach a fee or require notice which ends up with the consumer paying in some way for their desire to discontinue their association with a company or provider.
Individuals in private agreements who wish to avoid a contract or to discontinue their associations may also face significant legal challenges which the contract does not make provision for its termination, discontinuance and more importantly, the settlements of disputes which may arise during its execution. The next question to ask therefore is, should I wish to get out of this how can I escape and what would it cost me if anything?
There may also be times when an individual may wish to change or vary the terms of the contract and may wonder about the formalities of so doing. I will advise that trying to type over, write over or ‘running it by the other party while he was high’ is not the way to do it if you wish to stay out of prison or lose your interest under the contract! Such a variation must be made with the consent of the other party, and both need to be clear as to what it is that is being agreed upon.
Finally if you are writing the contract yourself use simple language and do not attempt to mimic the style found in legal documents, in short leave out the shall heretofore, theretofore, situate and other supposedly legalistic sounding terms, they simply confuse the issue and can be a general nuisance to the legal practitioners who are sore put upon to interpret the meaning of words which can create unnecessary and harmful nuances. Always review your agreements with the intention of keeping them clear and simple. Try to understand your rights and responsibilities in relation to the arrangements and that of the other party and to remember that dishonesty and or absolute self interest will usually cause your contractual arrangements to fail. If you are in business customers will leave , if it is a private contact it may be avoided on a number of grounds leaving you in some instances worse off than you were prior to its making. For complex agreements always consult a qualified professional so that you may get the most from your contractual arrangements.

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