By Rezdy — 11 Jul 2014

All businesses, including yours, will have to manage a variety of contracts. Your approach towards contracts is important because they are legally binding.

There are straightforward contracts – like a merchant account application form, or a liability release – and there are more complex contracts, such as the ones you create when partnering with an agent.

Here are some tips from the For Dummies folks on how to deal with contracts in the best way.

1. Understand when you are legally bound

To be accepted as a contract, it must contain the following elements:

  • An offer of some description is made
  • Acceptance must be given (either written or verbal, or a combination)
  • A reasonable expectation that if the agreement is breached, legal consequences could eventuate
  • Payment of money must change hands or be due to change hands as part of the agreement

As a tour operator, you will have contracts with your staff, customers, and partners.

Arguably one of the most important contracts is the liability release that you hand out to your customers. They prevent your business from being held responsible for any accidents that take place, given that you take reasonable care to avoid these accidents.

If you don’t yet distribute liability releases, then you should start! You must secure written agreements whenever the possibility of liability could arise.

Another type of contract you would use is that of the one you negotiate with your agents. These are more complex because they must be personalized to each agent (what tour products they will resell, how much commission they receive, etc).

We highly recommend seeking legal advice in both cases, because they are so vital to the running of your business.

2. Negotiate standard form contracts

Standard form contracts are those with set terms and conditions, mostly in the favour of the party who created the contract. For example, finance documents, insurance contracts, and retail leases all fall into this category.

If the contract is between you and a large organisation, it will be very difficult to negotiate any of the terms. In fact, most of the time you will just have to sign on the dotted line.

However, if the contract is between you and an individual – such as in a retail lease – there is more room to negotiate, so don’t be shy to share your thoughts.

3. Think before you sign

With each contract, make sure you know what you are agreeing to (especially if it involves charges), and what happens if things don’t go as planned.

Go through this hit list of items to check before you sign:

  • Are amendments properly documented as part of the contract?
  • Are any of the parties bound by confidentiality?
  • Is there a potential conflict of interest between you and the other party?
  • Can any tasks assigned to you be delegated to others?
  • Is there a clear process for dispute resolution?
  • Do you know when the contract starts and ends?
  • Do you know what currency payments are to be made in?
  • Does GST apply to any amounts referred to in the contract?
  • Are you protected from any claims an outside person may make against you?
  • What laws and regulations apply to the contract?
  • Who owns intellectual property rights and what are they?
  • Is there a certain level of quality or performance required by the contract?
  • Can the contract be renewed, and does it include a notice period that needs to be complied with?

Again, it would be worth seeking legal advice for any contract to prevent any future mishaps. Once you have signed, it is equally important to keep a copy of it, as well as any changes that have been negotiated. Never rely on verbal contracts alone.

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