Are You Sure You Want to Sign That?

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Altitude Accelerator was joined by Pallett Valo LLP to give our startups tools to tackle the legal aspects of entrepreneurship. Despite the ventures being from different backgrounds and industries for 2 hours they all engaged delved into a process that will touch every founder regardless of the customers they look to serve – reviewing a contract.

 

The message was loud and clear, when making and reviewing contracts don’t be lazy. Now, perhaps the seems pretty obvious, but how many of us have been guilty of checking off terms and conditions that we have not read or skimmed important documents such as a lease or medical forms at the doctor’s office? Chances are you are guilty of skimming contracts and the good news is in many cases, there are little to no consequences. However, if you apply this same behaviour to contracts you are signing for your venture you are running the real risk of facing future financial and legal penalties.

The good news is with some moderate effort it is possible to guard against these mistakes. Here are some of the takeaways that came out of the session.*

1. Don’t fear creating lengthy contracts

Many entrepreneurs are busy and would prefer concise easily understood contracts that don’t take too much time to look over. However, longer contracts allow the writer of the contract to input nuanced legal protections. This means they are able to cover and address a wider array of possible circumstances and have legal recourse to guard against them. In the same vain if you are handed a lengthy contract this might indicate something that has been favourably constructed for the other party. Take the time to understand it and seek legal help if you are having trouble working through it.

2. Make sure you know your name

When you sign a contract ensure that you are using the proper incorporated name and not any other title you might have for the business. Failing to do so could create ambiguity if a legal issue was to arise. What’s worse a confused writing of names could incur personal liability on the person signing the document.

3. Not every signed document is legally binding

Just because it is on paper, it doesn’t mean it can be enforced through the legal system. For example, a memorandum of understanding (MOU) and letter of intent (LOI) are often not legally binding. Do some research!

4. Don’t be afraid to seek legal help

Many early-stage ventures are strapped for cash and look for savings wherever possible. Contract negotiation is not the area to do on a budget. Don’t be afraid to seek out legal advice to ensure that your contracts are well made. The peace of mind that you will get from this will be an incredible asset as you build your business.

5. Consider setting up separate corporations if you are doing multiple hustles

It is not uncommon for entrepreneurs to have side hustles or multiple ventures happening at once. A common side job is running a consultancy. If this is the case, consider setting up separate legal entities for each venture. Doing so will allow for a more distinct separation of liabilities and protect the other ventures.

6. The details matter! The details matter! The details matter!

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This is not a comprehensive list, but I hope it has motivated you to take your contract review more seriously. Chances are as an entrepreneur you are building something that is really important to you. Don’t let a simple oversight keep you from reaching your goals. Lastly, if you need more information reach out to the Altitude Accelerator and they can point you in the right direction. With years of experience, industry partnerships and many experts to draw from, they can help set you up with the right legal connections.

*Disclaimer: This is not to be considered professional legal council, please seek out advice from a practicing lawyer.

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