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Five Contract Tips to Help Avoid Getting Burned by a Contractor

The following is a list of useful tips for your business to consider in contract preparation to help avoid liability exposure or getting taken advantage of by prime contractors:

1. First and foremost, make sure you have a contract in place before performing any services for a contractor!

Whether you draft your own contract or modify the contractor’s boilerplate contract language, making sure you have a written agreement between you and the contractor is of upmost importance.

2. Be sure to include the specific terms and provisions that govern your relationship with the contract.

As a business, prior to entering into any working relationship with a contractor, you should define the terms and provisions that govern your relationship, including when you are paid, when your services are complete and what costs are covered, among other key terms and provisions. By having these set forth in a contract, you and the contractor are able to determine when, and if, either party has satisfied or breached its obligations there under.

3. Clearly define ‘Scope of Work’ or ‘Level of Effort’ that sets forth any requirements or deliverables.

When you are performing services, a contract provides the mechanism to clearly define where your performance starts and delivery is complete. This is known as the ‘Scope of Work’ or ‘Level of Effort’ that sets forth the requirements or deliverables called for by the contractor. If this is not explicitly defined, the services you have been contracted to provide are open-ended with no definitive point of completion.

4. Set the term or time for the performance or delivery of your business’s services to the contractor and termination terms to end the relationship.

Almost all contracts have a set term or time period for performance. Otherwise, a party could take as much time as possible to complete its contractual obligations, whether this be in the delivery of services or payment for those services. Making sure a mutual agreement, or a meeting of minds, exists between you and the contractor when it comes to the time period of an agreement is vital. This way each party understands and can plan for the performance of its obligations within those time limits. Also, including a defined period of time places a reference point to determine if there has been a breach of contract.

5. Finally, the contract must be signed by an authorized representative of the contractor who has authority to bind the company.

In order to make the terms and provisions of the contract binding upon the contractor, the contract must be executed by both parties. Most importantly, the individual signing on behalf of the contractor must have authority, or power, to bind the company to the contract. Otherwise, a court may find that the contract you believed you entered into is actually null and void, and that the contractor is justified in not paying for the services you performed, in part or in full.

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