Checking the contract
- What do you need to know about contract review?
- Why it’s needed to check the contract
- What and how is checked in the contract
- Verification of counterparties
- How is the valuation of expensive property specified in the contract
- What powers do the representatives of the counterparty have
- Approval by the General meeting of participants or the Board of Directors of the company
- What is a dispute settlement agreement, its terms
- Why is it so important to check contracts
What do you need to know about contract review?
According to the current legislation, a contract is an agreement that allows you to change, generate or terminate the obligations and rights of the contracting parties. A contract may be concluded between at least two parties.
In simple terms, a contract is one of the types of civil and legal transactions. Most often, after the conclusion of the contract, one of the parties gets the opportunity to demand, and the other to satisfy such requirements. At the same time, if the contract is concluded in violation of the established norms, it cannot be considered valid.
Why it’s needed to check the contract
Checking the contract allows you to make sure that it complies with the norms and rules of the current legislation. Verification of the contract by a lawyer allows the parties to understand exactly that the document will not be invalidated in the future. In addition, such a procedure is a chance to:
- identify possible shortcomings and errors in the document, identify problem areas;
- to examine how the obligations and rights of the parties are balanced;
- check whether the document complies with the law;
- evaluate any other nuances that may have an impact on the implementation of the signed agreements.
In other words, the legal review of the contract is an important step before it is concluded. Thanks to this procedure, it becomes possible to eliminate and minimize risks in the relationship between the parties.
What and how is checked in the contract
Verification of the contract of sale or any other contract is a procedure that allows you to understand how correctly and balanced the document is drawn up. Among the main points that the trustee should pay attention to, the following should be highlighted:
- verification of the contract and the presence in the document of all the conditions that are provided by law for a specific type of contract;
- compare the obligations and rights of the parties;
- check the contract and conditions for fulfilling obligations (for example, when the goods will be delivered to the customer, see how the document records the process of fulfilling the obligations assumed, how payment should be made, when exactly the obligations of the parties can be considered fulfilled;
- check the contract and the deadlines set for execution, as well as the conditions that allow you to change these deadlines;
- to see what responsibility each party bears in case of non-fulfillment of obligations;
- check how the parties to the contract should maintain communication (notify of violations of the deadline, etc.);
- to see if force majeure is provided for in the document, how it affects the performance of the contract, how the parties can notify each other.
Legal verification of the contract makes it possible to exclude inconsistencies and errors in its drafting.
Verification of counterparties
Verification of the contract, among other things, also involves verification of the counterparty. To begin with, you should look at the information about the counterparty using the register of the Unified State Register of Legal Entities, and you should also get data from the registers of increased risk and bankruptcy. In extreme cases, you can visit the counterparty’s office to understand how much information about him corresponds to reality.
Checking the contract by a lawyer will reveal all inconsistencies.
Each contract must specify the subject separately (for example, delivery, purchase, service, rent, etc.). This should be done in such a way that the parties do not have the opportunity to interpret the terms in two ways. When checking the contract of sale of real estate, a specific object must be specified in the document. If this is not the case, then the contract should not be concluded. It should also be remembered that special attention should be paid to the calculation procedure. The document must specify all stages of payment, as well as the cost of the purchase or service. Often the price is indicated in a special annex to the contract – the price list. It is necessary to check that all the submitted papers are signed by the counterparty.
How is the valuation of expensive property specified in the contract
Verification of the contract of sale by a lawyer also involves an analysis of the valuation of expensive property. According to the current regulations, such an assessment is carried out by special experts. This allows you to specify in the document not only the exact market value, but also calculate the amount of tax that will need to be paid.
At the same time, this rule applies only to contracts between individuals. If the purchase and sale agreement is concluded between legal entities, and in this case, an assessment of the property by experts is not required.
Checking the contract of sale by a lawyer makes it possible to avoid the above errors.
What powers do the representatives of the counterparty have
In the process of verifying the contract, it is important to pay attention to the powers of the counterparty’s representatives. According to the current legislation, such a representative must necessarily have documented powers received from the counterparty. According to the rules, representatives of the counterparty may be:
- legal entities (general partnerships, faith-based partnerships, unitary enterprises, production cooperatives, JSC, LLC);
- individual entrepreneurs;
- individuals who do not have registration as an individual entrepreneur.
Representatives of the counterparty may act on his behalf in some cases only if there is a corresponding power of attorney, in other cases without it.
A legal review of the contract will allow you to assess the powers of the representatives.
Approval by the General meeting of participants or the Board of Directors of the company
During the verification of the contract between legal entities, partnerships and JSC, LLC, it is important to see that the signed document is approved by the general meeting or the board of directors. According to the current legislation, when conducting large transactions, LLC and other companies must obtain permits for such a procedure from representatives of the general meeting or the board of directors. If the document does not contain a footnote for such consent, it may be canceled by the tax service or one of the company’s participants in the future.
The approval procedure itself involves a vote, which is recorded by the secretary. In order for the action (signing of the contract) to be approved, a one-vote margin is sufficient.
Checking the purchase and sale agreement by a lawyer will make sure that the document has the necessary approval.
What is a dispute settlement agreement, its terms
A dispute settlement agreement allows the parties to reach a peaceful resolution of issues without involving the judicial authorities. Verification of a dispute settlement agreement involves understanding the conditions prescribed in this document. Among such conditions, it is especially worth noting:
- deadlines for consideration of the claims, they must be specified in the document;
- the possibility for the parties to send claims to each other by e-mail, this makes it possible to reduce the time of pre-trial settlement;
- claims should be sent by a valuable letter and with an inventory, so disputes can be avoided as to exactly how the plaintiff sent claims to the defendant;
- a list of documentation to be sent together with claims to settle the dispute in a pre-trial manner;
- the procedure and conditions for conducting negotiations to resolve the dispute and conciliation procedures.
The legal review of the contract makes it possible to avoid mistakes and thus shorten the terms of settlement of disputes.
Why is it so important to check contracts
If the parties planning to conclude a deal do not check the contract, in this case they may face a number of serious problems. Let’s look at some of them.
- If the risks are not identified in a timely manner when signing the contract, this may lead to the fact that the document will not be recognized by the judicial authorities as valid, which is why it can be terminated. Most often, this leads to losses on the part of individuals or legal entities that are signatories. In addition, the director of the company may incur subsidiary liability by law. Therefore, a legal review of the contract is simply necessary.
- The concluded contract may be invalidated if the document does not contain footnotes to: the conditions specified in the document, if the conditions contradict the applicable laws, if the transaction is an encroachment on the interests of other persons.
- The contract may also be declared void and terminated by the court if it was signed by an incapacitated citizen or if it was signed by a person who is of limited legal capacity.
- The contract may also be declared invalid by the judicial authorities if one of the parties signed it under the influence of threats, physical violence or deception.
Legal verification of the contract will avoid all such situations and will allow the parties to fulfill its terms without problems.
In addition, the verification of the contract will make it possible to prevent the signing of a document with one-day firms. Such erroneous actions can lead to losses and financial losses. The contract must contain a condition that in case of disputes, they will be resolved in the courts. If the risks are not identified in a timely manner when signing the contract, this may lead to the fact that the document will not be recognized by the courts as valid, which is why it can be terminated. Most often, this leads to losses on the part of individuals or legal entities that are signatories. In addition, the director of the company may incur subsidiary liability by law.
The concluded contract may be invalidated if there are no footnotes in the document to: the conditions specified in the document, the conditions contradict the current laws, if the transaction is an encroachment on the interests of other persons.
Only a legal review of the contract allows the parties to avoid mistakes and problems.