10 Rules For Contracts

Oct 25, 2023 | Uncategorized

A young farm couple recently asked for some guidance on a potential new production contract. They’re looking to raise broilers in an attempt to add another revenue stream + expand their farm.

Here’s a list of 10 Basic Rules for Contracts to keep in mind:

1. Understand Contract Dynamics

→ Whoever writes the contract benefits most.

Contracts primarily protect the interests of the drafter. As contracts aim to maximize advantages, those with less bargaining power might get less benefits.

2. Thoroughly Review Contracts

→ Always read and comprehend contract terms.

Contracts, once signed, bind you to specific legal obligations. Courts generally uphold contract terms, even if deemed unfair.

3. Seek Clarification and Legal Counsel

→ If unclear about contract terms, ask and get legal advice.

Some states mandate production contracts be “readable” (understandable and disclose potential risks).

4. Payment After Fulfillment

→ You must complete your contract obligations before receiving payment.

5. Don’t Assume Not Performing Will Be Excused

→ All contract terms hold legal weight, some more than others.

If unforeseen circumstances (even acts of God) hinder performance, it’s not always excused. If you anticipate defaulting, negotiate with the other party.

6. Be Aware Of Contractor’s Financial Situation

→ Ensure the party paying you is financially stable.

Research their financial status and consider contracts with legal payment guarantees. After all, you want to be paid once you perform.

7. Contracts Are Negotiable

→ Proposals can be amended before signing.

The point of maximum negotiation power is just before the contract signature. Preserve evidence of changes made to a written contract.

8. Document Contractual Changes

→ Always document contract amendments in writing.

Avoid relying on verbal communications. Most contracts have clauses that recognize only written changes.

9. Keep Good Records

→ Document all activities related to contract performance, including deliveries, payments, and communication with the contractor.

This documentation can be crucial in disputes.

10. Maintain Open Communication

→ Good communication with the other party is essential.

This helps resolve uncertainties, address payment delays, and navigate challenges that could affect contract fulfillment.

For best outcomes, approach production contracts with caution, clarity, and understanding.

Keep good records and open communication, which are keys to any business relationship.

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