S.T.O.P. Before Signing Someone Else’s Contract

Before signing someone else’s contract, every business owner should train his or her staff to S.T.O.P.

Scope of Work


Other Obligations

Payment Terms

Scope of Work.  What is it you are obligating your business to do by signing the contract?The vast majority of problems on a project can be avoided by a precise and well drafted scope of work.  Alternatively, if the scope of work is vague or contains items for which you do not intend to be held responsible, no amount of verbal assurances or agreements can make up for the problems lying-in-wait as a result of a signed contract containing an imprecise scope of work.Do not sign a contract until you are pleased with and intend to be held to the letter of this provision.

TerminationWhat are the circumstances under which each side could get out of the contract?In other words, are the exits clearly marked?Depending upon the duration of the work to be performed under the transaction, this can be one of the most important provisions in the document.Often, one party or another can elect to terminate the agreement if one or more key assumptions are not met.For example, a commercial lease may be amended to provide that the prospective tenant may terminate the agreement if the space is not fully ready for occupancy by a date certain.Similarly, an obligation to perform work may be nullified if the other side fails to provide all necessary materials by an established deadline.In deals gone wrong, termination provisions are often the only way to stop the bleeding. 

Other Obligations.  Contracts often make reference to other documents containing information or terms to be included as part of the parties’ agreement.  As an example, this is typical in the construction industry where an agreement between a subcontractor and the general contractor specifically states that the parties are also to be governed by the terms in the general contractor’s contract with the owner, the project plans and specifications, and other documents such as the General Conditions.  Outside of the construction industry, many standard contracts refer to terms and conditions in so-called master agreements, or even those posted on websites.Make sure you know ALL of the terms of the deal before signing on the bottom line. 

Payment Terms.  This is, of course, where the rubber meets the road.Few questions in business are more important than:

  • Who is responsible for paying you?
  • How much will you get paid?
  • When is payment due?
  • What are your rights if payment in full is not received?

Surprisingly, many businesses leave the answers to these questions open to chance.  Contracts often do not clearly identify the actual person or company responsible for payment, and the payment terms are often deliberately vague.  In this case as in no other, two sentences in writing outweigh all the verbal assurance in the world.

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