Being a business owner means that you have to wear many hats and that includes being an accountant, manager, lawyer, and even a cleaner if the task arises. These tasks can deter entrepreneurs from the true passion for their small business and leave them with no time for growth. Despite these many responsibilities, entrepreneurs are able to outsource tasks, and not planning your legal agreements could cost your business thousands of rands in the long run should a legal issue arise.
Treat all agreements, including verbal arrangements as a ‘contract.’ It will help put you in the right mental and legal frame of mind from the outset. Agreements could include service level agreements, cost estimates, rental contracts, employment contracts, and admissions of debt.
Here are some of the things to consider about agreements as a small business owner:
1. Formalise it. Write it down.
As a small business, it is easy to trust individuals who promise to perform in terms of providing a service or goods for your small business. As a director, you may have to make the difficult call of striking a deal verbally at that time as you are under tremendous pressure to grow your business in the demanding and competitive market. It is important to note that when you agree verbally, those agreements are binding on your business. As the saying goes, “verbal agreements are not worth the paper they are written on”. Verbal agreements are difficult to prove and there is a resounding recommendation from lawyers that the terms of that agreement should be written. Even though most written agreements are not a requirement by law, if a breach of an agreement is encountered by your business it could be difficult to navigate in court for even a skilled lawyer.
2. Read, read, read.
Entrepreneurs are busy individuals but a simple task such as reading your agreements may fall by the wayside. An important aspect of contracting with another party is reading the entire agreement. If you do not understand the terms of the agreement you could bind your small business to a number of factors that could cost you both time and money. The good news is that if you determine the difficult or unfair clauses upfront then you can avoid a lot of misunderstanding at a later date. If you do amend an agreement, ensure that you record all amended clauses and that this is signed and witnessed by all the contracting parties.
3. Did you say “cancel”?
As a small business, you have to make lightning-quick decisions when you are attempting to resolve a problem that you are encountering. This can lead you to agree to the terms of the agreement without considering the consequences. Some service providers may have an excellent selling point for their service however the service provided may not be suited to your business. In order to avoid entering into an agreement that you may soon regret, consider the cancellation clauses of the agreement and specifically the months you will be responsible for payment after you have cancelled the agreement. Note that some agreements may have a one-month cancellation and others may have a notice period of up to three months. If you have signed the agreement, you have agreed to the terms, and will be liable to pay in terms of the cancellation clause. Similarly, take note of return policies for products that you purchase for your small business.
4. Manage your risk professionally
As an entrepreneur, you may have the expertise to do whatever it takes to grow your business. Unfortunately, the incorrect legal decision as an entrepreneur can cost your business time and money. Fortunately, legal expertise and knowledge can be outsourced. There are legal experts that you can pay to determine risks in an agreement provided by a service provider or to draft the relevant agreements for your business’s legal needs. Consider paying an attorney to draft or review these agreements on your behalf. An attorney will charge you on a per-hour basis to review or draft the agreement. The benefit is free time for you to focus on the daily running of the business.
As the needs of smaller businesses grow, so has the supply of more affordable legal alternatives become more available and popular. For a small monthly fee, you could have access to a range of services your business needs. Legal services insurance is also designed to be convenient and offers many support services digitally, minimising time spent in a lawyer’s offices.
Most importantly, do you your homework and do the best for your business.
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DISCLAIMER: This information is published as general information and is not intended to constitute legal advice. Specialist legal advice should always be sought in relation to any particular situation.