1. All is well that starts well
Excitement can be deceiving, and costly. It is easier to enter into contracts at the start of your venture because it becomes harder to remember to write down what you agreed the longer you wait. A common mistake among startups is the rush to start the venture while arguing that it is not important to write down what you have agreed to do. It is difficult to enforce what is unclear between the parties. Create the contract at the start of the engagement, or as soon as possible.
2. For want of a comma, you may lose everything
Improper punctuation may cost you. Punctuation can distort the meaning or make it concise. A misplaced comma may lead to a loophole that favours a party at the expense of the other (See for example, O’Connor v. Oakhurst Dairy, No. 16-1901 (1st Cir. 2017)). You read not only to know what you are signing but also to see if there are some commas that will create expensive mistakes.
3. Clarity is an unfailing friend
If you are going to use words in a special or technical sense, provide the definitions in the contract. If the words of the contract are used in their normal sense, it is not necessary to define the obvious. In all cases, only use the words you need and no more. A contract is made worse, and is more likely to become ambiguous, when the phraseology of the contract is complicated, and confusing instead of being direct, and clear.
However, superfluous words may not ruin a contract ( i.e., falsa demonstratio non nocet). For example, a mere misdescription does not affect what is already certain between the parties. In the same way, words that are grammatical errors may not vitiate what is already concise in the contract.
4. Disputes are sure to come
Do not assume that business will always be good, or that you will never have a dispute with the other party to the contract. Create practical and effective dispute resolution methods. Assess the nature of your engagement and determine if you would like to use only one specific method of dispute resolution, or if you would prefer to use a variety of methods depending on the nature of the dispute, or the amount of money involved. One common mistake among startups is copying an arbitration clause into all their contracts instead of assessing whether arbitration would be appropriate given the issues that may arise from the contract.
5. What you entertain may cost you
Acquiescence is when a party to the contract does not perform their duties and you do not protest the violation or take steps to enforce the terms of the contract. For example, if the contract says that both parties should contribute x amount of money for the venture and only one does, the other party will be taken to acquiesce if they do not ask the other party to comply with the contract. You have acquiesced if you continue performing the contract without communicating your dissatisfaction concerning the violations. If you sue, the other party will be allowed to argue that your indolence justified their violation of the contract.
6. The unwritten is not part of the contract
If it is not written, it is not part of the contract and you will not be allowed to explain that it is (i.e., the entire agreement rule – Section 97, Evidence Act (Cap. 80)). If you consider it important, make sure it is included in the contract, do not assume that it is not necessary. At times, people think they know and agree on what is important, so they feel there is no need to write it down. You would rather deal with the discomfort of writing down clearly the nature of your engagement than to lose everything later yet you could have prevented it at the start.
7. Ambiguity is an unfavourable trap
Whenever there is a dispute over the meaning of an ambiguous term, the court may adopt the meaning that is most favourable to the non-drafting party (i.e., the contra proferentem rule). It is a rule of last resort if the meaning of a term in a contract remains ambiguous after exhausting all other methods of interpretation. It is not necessary to understand all the legal terminology that affects your contract, but it may be useful to ask your drafter to explain the meaning of anything that appears unclear to you.
8. All is well that ends well
The excitement of starting a new venture can be so intoxicating that parties forget to think about how they should end the commercial relationship. A common mistake among startups is the copying of a termination clause from other similar contracts instead of creating a termination clause that would serve the purpose of the present parties, which ends up making the termination messy. Parties should pay close attention to the contents of the termination clause because it is quite inconvenient to be held back unnecessarily when the contract no longer serves any useful purpose. On the other hand, the termination clause should not be so poorly drafted that it allows one party to evade the contract at the slightest excuse.
This article is provided for general information; it is not legal advice. For any assistance, kindly contact us for guidance if you wish to rely on it.