Tips for Ensuring Agreements Don’t Fail
When you wish to enter into an agreement between yourself and another person(s), there are many reasons why an agreement can fail.
Agreements can be made in oral or written form, often in the exchange of letters or emails. People generally rush when making these kinds of agreements and therefore don’t think about the worse case scenario.
If you are entering into an agreement, ask yourself the following questions to make sure you are protecting yourself and/or your assets:
- Who are the actual parties to the agreement?
- Have searches been conducted to see whether the right parties actually exist when entering into an agreement?
- Is the price and any deposits/terms adequately set out?
- Is there a GST effect?
- Is the agreement enforceable – do you mean it to be binding or is it a statement of intentions subject to formal documents in the future?
- What is the security for the obligations, i.e. is there a bank guarantee or some other form of personal guarantees?
- Does the agreement adequately set out who does what, when and in what manner?
- Does the agreement, and what is documented, practically work?
- Have you asked yourself what are the 5-10 worst things that can happen if you enter into the agreement or the agreement is breached?
- What do you expect to happen in the event of default by the other side? This is an important consideration often overlooked.
- Is the agreement subject to conditions? If so, are they set out properly?
- Is the agreement signed? Is the deal actually done?
In summary, there are many aspects to having an accurate, enforceable agreement made. Even if there is a summary of an agreement by exchange of email, careful consideration as to these types of issues must take place.
There is nothing worse than thinking you have an enforceable agreement, when you actually don’t!
We assist clients when they enter into Memorandums of Understanding, binding and non-binding Heads of Agreements and the actual agreements themselves. We can even help with an initial exchange of email communication.
Many agreements must remain in place for a number of years, so they need to be correct. Whilst it is great to save costs, if the agreement doesn’t adequately cover the considerations necessary, it can causes litigation in the future and a huge cost to yourself.
