What do you do when you have to sign a contract with bad terms?

Contracts with bad terms, what do you do?

So, what do you do when you have to sign a contract and the terms of that contract are, let’s face it, crap? Right-o, I can help you answer that.

 Hi, everyone, Simon here from The Contract Company, and I also run another website called Ask a Contract Lawyer, where you can ask those contract questions and we’ll provide a video answer.

Dealing with Contracts with Bad Terms

So what do you do when you have to sign a contract because, let’s say, you need the money and you’ve tried to negotiate the terms of the contract and the terms are still crap?

So let’s just back up a bit. Every time you do a contract or you try and negotiate a contract, there is always, it doesn’t matter what people say, there is always one party that has more leverage over the other party.

And so let’s say in your case you’re just a, I don’t know, a contractor.  You’re trying to do some work for a large entity, let’s say it’s the Commonwealth?

Then two things. Good luck trying to negotiate with the Commonwealth.  But also, yeah, you’re just never going to get any traction with them because they are big. They have all the leverage and they’re just going to push you around. Now that happens basically to nearly everyone in every contract.

Even if you’ve got two entities that are large, you’ll often find that one wants the work more than the other, or one cares less about work than the other and that creates that leverage.

Negotiation

Now, I’ve been to Harvard twice to Harvard Law School. I’ve done two courses in the last two years on negotiation.

And so the Americans talk about this BATNA, as in you’ve got to have a best alternative to a negotiated agreement. And that’s just fancy American terminology for saying you got to know when to walk away. You’ve got to know when the deal on the table’s crap and when to walk away.

Now, that’s all well and good, you say, Simon, but what do you do when you actually need the money and you need the money more than you care about how bad terms in the contract are? So what do you do?

Simple, you sign the contract. That’s right. But this is what you can do after.

So if you sign a contract where the terms are pretty bad and they’re badly to your detriment or not in your favor. Then the biggest issue you’ve got is if they take action under that contract in the future.

So if they come after you in the future, under the terms of the contract and start quoting the contract to you. Then in your mind, you should know that’s where you’re going to have trouble. That’s when you’re going to have, well, there’s going to be problems for you.

 So what do you do? It’s simple, but not a lot of people do it well.

Keep Communications Open

All you have to do is maintain a decent relationship with the other party. And that means doing things like catching up with them for a coffee every now and then.  Having a chat and just talking things through.

In fact, that is one of the biggest things they stress at Harvard when I went there in those negotiation courses. You got to keep the lines of communication open.

So you sign your contract.  Then what you need to do is you always need to keep those lines of communication open.  Just keep talking to them.

Why do you say that, Simon? Well, it’s simple.

When things go bad, if you have a good relationship, the other party will pick up the phone and they’ll say this.  “Listen, Simon, in our contract, you’re meant to do this. It’s gone off the rails. What are you going to do to fix it?”

Now, if you don’t have that good relationship, what does someone do? I’ll tell you.

The first thing they do is engage in their legal area. They start looking at the contract and working out ways to slap you. And if you’ve signed that contract that is badly against you or not drafted in your favor, you’re going to get slapped pretty bad.

Maintain a Good Relationship

So the only way to try and do that, or the way to mitigate it at all is to put in place or try and maintain that decent relationship after you’ve signed the contract. This is because that relationship could actually save you.

So make some effort, keep the other side on board. Let them know if there are ever any problems, just to give you a call and discuss things and you’ll work through everything.

And that way, no one will ever look at that contract again.

In fact, that’s what seems to happen most times, is your haggle and negotiate over the contract, gets signed. It gets put in someone’s drawer and you never see it.

But it will get pulled out if the relationship’s gone south and people are looking to slap others.

So, that’s my tip. Keep the relationship open, keep the relationship going. Be Frank and honest in your communication with the other side and just be willing to discuss things.

And that way, if things do go badly if some issue or event arises, they won’t look at the contract. They’ll actually look at you first.

They’ll come to you first and ask you to fix it. And that way, you’ll avoid those negative or contracts with bad terms being used against you.

Hope that helps, a long-winded answer, but I thought it might be of value. Any questions, please feel free to get in touch, 1800 355 455, or Simon@contractcompany.co.au. Thanks very much.

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