Looking at campgrounds for your small group retreat? Hoping to finally rent that commercial copy machine for your local church? Wondering if you should sign a contract with the new violin teacher who is using your academy’s music room every Tuesday morning?All these scenarios involve signing a contract. Although you should always have an attorney review any contract before signing, it is also important for you to review the contract yourself. Unless your organization regularly works with an attorney, the attorney will simply not be as familiar with the interests and concerns of your organization as you are. This article will focus on the process of signing a contract, including a few key items that you should review before a contract is sent to the attorney.
1. Determine if the person signing the contract is the person who should be signing the contract.Is the person signing the contract authorized to sign on behalf of the church or school? If yes, make sure the person clearly indicates their own representational capacity. For instance, instead of simply signing “John Smith,” they should sign “John Smith, Treasurer of Apple Conference.” Failing to sign with the proper authority, or failing to indicate that you are signing as a representative of the organization, allows the signee to potentially be personally liable on the contracts they sign.[i] Check with your local conference to see if contracts should be signed by a conference representative instead.
2. Confirm the proper legal names of the parties.Do you know the proper legal name of your organization? Of course, you know who you work for—or do you? Depending on whether or not your organization is incorporated, the name of your organization may be longer than you realize and may not be the name that is commonly used. Always double-check the official legal name of your organization with the proper offices.
3. Confirm dates and terms of the contract.The term of a contract begins on the contract’s effective date, which is ordinarily the date the contract is signed. When parties sign on different dates, the contract becomes effective on the date signed by the last party to sign. Does your contract state when the terms of the contract will end? If an end date is not specified in the contract, it is recommended to provide an end date to avoid any uncertainty.
4. Make sure the contract clearly establishes what happens if something goes wrong.We sign contracts to determine what needs to happen when something doesn’t go according to plan.
- Look for amendment and waiver provisions. Is there any flexibility in contract provisions should there be a change in operating needs or conditions? For instance, can the terms of a payment schedule be renegotiated during the contractual period?[ii]
- Look for nonperformance clauses. What happens when the promised goods or services are not followed through as promised by the contract? Is the solution provided in the contract acceptable to your organization?
- What fees and penalties may be applied or triggered? Some common fees that can be found in contracts include fees for late payments, fees for nonsufficient funds, and fees or charges for failure to abide by all the terms of the agreement.[iii]
5. Locate insurance and liability requirements.Contracts with insurance clauses typically state the minimum required coverage and what events would trigger liability. Check with your conference or your Adventist Risk Management, Inc. (ARM) account executive (AE) about whether the stated insurance requirements are covered by your ARM policy. Your AE will be able to advise if additional coverage may be needed. They can also advise on insurance requirements you should seek from the other party.
6. Review the contract with an attorney.If possible, always review your contract with a local attorney. While reviewing a contract, there are several provisions that an experienced attorney would consider, such as the scope of the agreement and the payment terms.[iv] They will also make sure you are compliant with any applicable local laws.
7. Designate a contract manager.After your contract has been signed and executed, your organization would ideally have someone tasked with managing all the signed contracts. This individual would keep copies of all signed contracts and keep track of dates on a separate calendar. This refers not just to the start and end dates during the contract’s terms; it may also include noting the first date when early termination is allowed or setting a reminder a few weeks before renewals are due. All implied timelines from the contract should be marked on a calendar.
The contract manager would ideally also oversee all digital signatures used by the organization. They would make sure digital signatures and signature stamps are stored in a secure location with restricted access. Digital signatures and signature stamps are easily susceptible to abuse and should always be accessed with care.[v]
ConclusionContracts can be overwhelming. Even though an attorney can be a great help, no one is as familiar with your ministry as you are. The seven points above offer helpful information for making sure your contract is ready to be signed and properly followed.
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