Trust but verify: analyzing an agreement with a business partner

In today's business, the word "trust" comes at a price - and often a very high one. Successful partnerships are based not only on good intentions, but also on clearly written agreements. A single rash signature on a contract can cost a company financial losses, a damaged reputation, or even litigation. That is why analysis of the contract with a business partner - This is not bureaucracy, but a mandatory stage in protecting your interests.

In this article, we'll look at why you need legal due diligence on an agreement, what you should check before signing it, and how to protect yourself from hidden risks.

Why is contract analysis always beneficial?

Many Ukrainian companies still treat contracts as a formality. However, practice shows that: 90% commercial conflicts arise from gaps or ambiguities in contracts.

Here are a few reasons why the contract needs to be carefully reviewed:

• The terms may be deliberately written in favor of one party.

• Regulations may contradict the law or contain legal traps.

• Key provisions are missing: liability, terms, termination procedure.

• The document was prepared without taking into account the specifics of your business.

And most importantly one point is enough to lose control of assets or money.

Which contracts must be checked?

The list is not exhaustive, but it is worth checking especially carefully:

• Contracts with new partners or clients
  The first cooperation is always a high risk.

• Contracts for large amounts or with deferred payment
  The more obligations, the more serious the guarantees should be.

• Joint venture agreements, investments, franchises
  There are many nuances and hidden risks.

• License, copyright, IT agreements, rights transfer agreements
  Intellectual property requires a separate legal filter.

• Agreements concluded under foreign law
  If you don't understand the jurisdiction, you need a lawyer.

What exactly to check in the contract?

1. Correctness of details

The first thing you should check is whether the person signing the contract is really authorized to do so. Fraudsters often use fake seals or signatures.

2. Subject of the agreement

It must be clearly and understandably described. No ambiguities. If the contract provides for the supply of goods, specify their quantity, characteristics, and quality standards. If it is a service, specify the specific scope, results, and terms.

3. Terms of fulfillment of obligations

"As soon as possible" is not a deadline. Specify dates, schedules, and the possibility of rescheduling. Clear planning protects both parties.

4. Price and payment procedure

The agreement must contain:

• a clearly fixed amount or a mechanism for calculating it;

• payment schedule (advance payment, phased payment, upon completion);

• penalties for late payment.

5. Responsibility of the parties

Who is responsible and for what? What happens in case of violation? What are the penalties? How are claims processed?

6. Terms of termination

Can the agreement be terminated unilaterally? What are the grounds? What are the consequences? Often, businesses find themselves in a "trap" when it is legally impossible to withdraw from an agreement without incurring losses.

7. Jurisdiction and dispute resolution procedure

Determine which court will hear any disputes. If we are talking about an international partner, are you ready to sue, for example, in Austria?

8. Force majeure circumstances

If the contract is concluded for a long time, it is necessary to foresee unforeseen situations: war, lockdown, export ban, changes in legislation.

Examples of hidden risks in contracts

• Automatic contract renewalIf the company does not send a refusal within 30 days, it will be forced into a new year of obligations without any desire.

• Obligation to purchase a minimum volume of goodseven if it is not needed.

• The ability of a partner to unilaterally change prices or terms.

• Signing annexes without signing the main agreement - legal conflict.

• Intellectual property rights are automatically transferred to the counterparty.

Who should be entrusted with the contract review?

Best of all commercial lawyerwho understands not only the law but also the business logic. A CFO or sales manager may overlook important legal details.

Lawyer:

• will analyze all the provisions;

• will indicate potential risks;

• will suggest wording that will better protect your side;

• will help in negotiations;

• prepare recommendations or a new version of the agreement.

Conclusion: what should businesses do?

1. No contract is signed without analysis.

2. Don't be afraid to make changes. An agreement is the result of negotiations, not a dictate.

3. Keep a single register of contracts and review them regularly.

4. Sign it only after consulting a lawyer.

5. If in doubt, it is better to lose the deal than to get the company into trouble.

How can we help?

У Axel Legal We analyze business, investment, partnership and IT agreements on a daily basis. We don't just read documents - we We take into account the specifics of your businessWe see risks where others do not, and always offer constructive correctionswho do not disrupt the deal but protect your interests.

Need a contract review - quickly, accurately and without water? Don't hesitate to contact us.