Top 5 Mistakes to Avoid When Signing Contracts

Contracts are a cornerstone of business and personal transactions, serving as legally binding agreements that outline rights and obligations. However, signing a contract without proper understanding or preparation can lead to disputes, financial losses, or legal consequences. Here are the top five mistakes to avoid when signing contracts in Uganda.

1. Failing to Read the Entire Contract

One of the most common mistakes is signing a contract without reading it thoroughly.

• Why it’s a Problem: Important clauses or unfavorable terms may be hidden in the fine print.
• How to Avoid: Take time to read the entire document, including attachments and referenced policies. Seek clarification on unclear terms.

Example: A landlord-tenant agreement may include penalties for early termination that you miss if you skim through.

2. Not Understanding the Legal Terms

Contracts often contain legal jargon that can be confusing to non-lawyers.

• Why it’s a Problem: Misunderstanding key terms can lead to unintended commitments.
• How to Avoid: Consult a lawyer to explain complex legal language before signing.

Example: Terms like "indemnity," "force majeure," or "non-compete clause" may have significant implications for your rights and obligations.

3. Overlooking Termination Clauses

Termination clauses outline how and under what conditions the agreement can be ended.

• Why it’s a Problem: Ignoring these clauses can leave you trapped in unfavorable terms or lead to unexpected liabilities.
• How to Avoid: Carefully review termination provisions and negotiate reasonable exit terms if necessary.

Example: A service agreement may require 90 days’ notice before termination, which could be impractical for your situation.

4. Ignoring Payment Terms and Penalties

Contracts often include details on payment schedules, penalties for late payments, or interest charges.

• Why it’s a Problem: Misaligned expectations can strain business relationships and lead to disputes.
• How to Avoid: Verify that payment terms align with your financial capabilities and negotiate any that seem unreasonable.

Example: Missing a clause on interest charges for late payments in a loan agreement can result in steep financial burdens.

5. Signing Without Negotiating

Many people assume contracts are non-negotiable, but this is rarely the case.

• Why it’s a Problem: You may agree to unfavorable terms simply because you didn’t attempt to change them.
• How to Avoid: Identify clauses that could be adjusted and discuss them with the other party before signing.

Example: In an employment contract, you might negotiate for a higher salary or better benefits instead of accepting the initial offer.

Bonus Tips to Protect Yourself When Signing Contracts

• Verify Parties Involved: Ensure the names, roles, and responsibilities of all parties are accurate and complete.
• Document Verbal Agreements: Include all verbal commitments in the written contract to avoid future disputes.
• Check Governing Law: Understand which jurisdiction’s laws apply to the contract, especially in international agreements.
• Retain a Copy: Always keep a signed copy of the contract for your records.

How Ekima Advocates Can Help

At Ekima Advocates, we specialize in contract review, drafting, and negotiation to protect your interests. Our services include:

• Explaining terms and identifying potential risks.
• Negotiating favorable terms on your behalf.
• Drafting clear and legally enforceable contracts.
• Resolving disputes arising from contractual issues.

Conclusion

Signing a contract is a serious commitment that requires careful consideration. By avoiding these common mistakes and seeking professional legal advice, you can protect your interests and ensure a smooth transaction.

For expert assistance with your contracts, contact Ekima Advocates today. Let us help you navigate the complexities of legal agreements with confidence.