As published in the September 23, 2014 edition of the Sioux Falls Business Journal

By David L. Rezac

This is a legally binding contract. If you do not understand it, seek legal advice.

Everyone has seen this disclaimer before, and there is nothing mind-blowing about a recommendation to read a contract before signing it. Yet, it is also true there are times it might be reasonable to take the risk of signing a contract without carefully reading it. Many people do just that from time to time.

Be careful, however, not to grow so accustomed to this practice that you start to apply it more often than you should. To that end, consider the following pointers for identifying contracts with which you should be particularly careful.

Most people recognize the more obvious factors for deciding how cautious to be with a particular contract, such as the amount of money involved, how complicated the transaction is and the risks associated with what the parties plan to do.

A less obvious but equally important factor is whether the contract has been drafted specially for the particular transaction. This is often the case for business purchase agreements and commercial leases.

If a customized agreement must be created for the transaction, it likely means the contract includes unique and special terms to which you should pay close attention. The party drafting these unique agreements has the ability not only to shift previously undiscussed risks and responsibilities to the other party, but also to raise or completely avoid potential issues.

Another important factor is whether the contract contains unusually confusing or difficult language. Very often, those confusing provisions are the ones that contain objectionable terms. So if you find the contract to be difficult to understand or even if just one or two particular provisions of an otherwise straightforward contract are confusing, take the time to gain an understanding of those provisions. Even one seemingly minor contract term has the potential to cause serious trouble.

For example, a client recently received a proposed agreement. He expected it to provide him a fee for new tenants brought to a particular property. Instead, the contract provided he would be entitled to a fee only if new tenants were brought to a new facility on the property. Considering there were no plans to build such new facilities, this was a pretty significant and detrimental qualification. The inclusion of only a few inconspicuous words within the agreement – “new facility” – resulted in a dramatic difference in its effect.

While it is not always possible or essential to carefully review every agreement – consider the terms and conditions for your smart phone – as long as you do not fall into the bad habit of frequently ignoring the fine print and apply reasonable screening techniques when deciding how carefully to read a contract, the odds of running into serious problems should be minimized.

And if you decide you need to “seek legal advice,” help is certainly available.

Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the state’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit