Contractual terms play a significant role in business. The terms and conditions enlisted in a contract dictate the relationship between the involved parties. Executing a contract without completely comprehending the terms and conditions increase the contract risk factors in business. Minor alteration in the provisions and clauses of a contract can result in adverse consequences. There are several factors that are to be checked off the list before executing a contract. A few critical contract risk factors to consider before signing a contract includes,
The Details of the Trading Company
Contracts are legal documents that are bound by the law. The details of the trading companies furnished in the contract document must be accurate. There have been instances where fraudulent companies furnish fake details to cheat the contracting parties. The prudent measure to avoid such ordeals and malpractices is to verify the soundness of the details furnished by all the involved contractual parties. From the registered address to the nature of their business, a simple background verification will render the required information and save the organization from getting duped. Creating a database of the fundamental information of clients and vendors in the contract management software is one of the best measures to ensure that only verified details are stored.
Click here to read : Ways to Keep Your Electronic Documents Safe Long-Term
The Law of the Land
The governing laws vary with the country, and sometimes the county too. When a Multi-National Company has to conduct business with a foreign company outside the US, it has to adopt the International laws that oversee the business regulations as well as the laws of the country. Even within the US, the law might be different between states, which requires in-depth analysis before contractual commitment. The best practice here is to understand the laws that govern the land and the penalties attached through legal expertise and follow their advice comprehensively. It is essential to comply with the laws and regulations as stated by the jurisdiction and evaluate the contract documents with legal support to avoid inconveniences.
The Terms during a Disaster
The sudden onset of the COVID-19, the global pandemic has brought forth a wave of Force Majeure in contracts, where the terms and conditions of the contracts were rendered non-compliable. It has become essential to incorporate clauses that govern contracts in the case of an unforeseeable circumstance. Jointly discussing and settling on the terms and conditions in the event of a disaster facilitates organizations to be better prepared and be empathetic during turbulent times.
Click here to read CLM in the Healthcare Industry during the COVID-19 Pandemic
The Terms on Settling a Conflict
Conflicts are a part of the business. When differences arise between the contract partners, oftentimes it requires legal intervention for it to be settled amicably. However, to avoid the inconveniences arising from conflicts, it is better for the organizations to set down rules regarding dispute resolution. Minor differences and ensuring compliance can be effected through arbitration, which provides legal support without being ended in the court of law.
Penalty for Non-Compliance
Non-compliance with the contract terms is a wide-spread phenomenon, where organizations due to several internal or external factors may not comply with the terms intentionally or unintentionally. Either be the case, it is essential for the involving parties to determine the penalties and the number of notifications given prior to invoking the penalty. Providing valid inputs regarding non-compliance and deciding on the terms of compliance.
Click here to read: How Contract Automation is changing the Business World?
Contracts enable the involved contractual parties to mitigate the business risks to a great level. Among the various factors to be keenly considered while drafting a contract, incorporating risk mitigation terms and conditions will help the organization in the event of a trading mishap. It is especially helpful when there are several involved contractual parties under one contract. Determining who would bear the risk of loss, and the circumstances in which it would come to effect priorly will save the involved parties from conflicts and legal cases.
A sturdy contract management software will enable the users to meticulously compose and execute contracts with all the critical factors taken into account duly. DocuCollab‘s Contract Management Software is designed to enable users to focus on contract creation and management efficiently. To learn more click here