The main reason to enter into contracts is to lay down the clear terms and conditions of the transaction and also to bind both the parties contracting to the terms of the contract. So if anyone of the two parties violates any clause then the other party can approach a court of law and take legal action against the other party. Contracts are legally enforceable agreements.
Therefore in order for a contract to be enforceable, it has to be legally valid. If they are not legally valid then in case the other party violates any of the terms of the contract then legal action cannot be taken against him. While most of the big businesses or entities have in-house counsels to draft and manage their contracts, this is not the case when it comes to small businesses or startups. Starting a new business is not an easy task, it requires the proprietor’s attention and investment in various aspects and hiring a lawyer might not be possible, either due to lack of enough funds or most small businesses and startups don’t hire a lawyer until they are sued.
It is important for lawyers to review contracts of the business before its signed because there might be various clauses and terms that might seem fine to a layman, but such clauses can put you and your business into trouble. This is because there are so many laws that we are not aware of, and these laws govern some of these clauses in the contract. Therefore only a lawyer will be able to identify the catch in such clauses. Prevention is always better than cure. So once a lawyer has gone through the terms of the contract, he/she will be able to guide you as to how certain terms can put you in trouble, so you can amend such a clause before signing it. It’s just like how only a doctor can tell what is wrong with us by looking at the medical report, even though we can read what is written but we don’t really understand what it really means.
There might be various clauses in the contract that might seem harmless to anyone without a legal background, but only a lawyer can identify the implications of such a clause. For example, an arbitration clause, which states that in case any dispute that arises between the parties then it shall be resolved by appointing an arbitrator, and the venue for arbitration will be Singapore. Some arbitration clauses will also include which country’s laws will be applicable to the arbitration proceedings. Upon reading such a clause it might seem harmless. But it has various implications, like the choice of law applicable to the arbitration proceedings might not be favorable for you or even if its favourable and the decision or award is also in your favour, but it might not be enforceable in India. Therefore, only a lawyer will be able to foresee such situations and understand the implications of such clauses and guide you as to what is favourable for you and your business. Therefore it is important to get your business contracts reviewed by a lawyer even if you are just starting the business.