Let me first refer you back to the first post on this topic (you remember that Dilbert cartoon) [See previous chapter on Contracts – Introduction]. So, let’s all be honest with ourselves. How many times have you been faced with the negotiation of a vendor agreement and thought to yourself – well if we have an issue “We Can Work it Out” http://www.youtube.com/watch?v=FVBnkOL-8Jw ? Well it makes a nice song, but when you’re in the middle of a dispute wouldn’t it be nice if the contract language was on your side. The reality of your vendor agreements is that they can represent the backbone of your business. What if your data server goes down, you can’t get the supplies you need, your developer doesn’t deliver or delivers a faulty product? A contract cannot guarantee performance but it can provide you with a proper allocation of risk and maybe some leverage to ensure performance. The thing you aim for in these agreements is not an airtight agreement (you’ll almost never get one – and especially as a start-up with no leverage) – but rather an appropriate balancing of risk and reward between you and the vendor to ensure that the vendor has the incentive to deliver the goods and you have an incentive to pay. At the very least, you should understand the risks and obligations of each contractual commitment and manage your business with those in mind. I could spend the next few weeks/months on the art of negotiating and understanding your contractual commitments but we’re going to save that for the next journal.
Next installment, Contracts – Client Agreements, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.