Negotiating and signing a contract can sometimes seem like a complicated or time-consuming process, especially if signing the contract holds up the start of a new project.

And sometimes it seems like the best decision is to start the new projects, thinking we will sign the contract later - after all, it is important to “get the job done”.

However, signing the contract is essential, sometimes even critical - and here we are not just talking about those situations where you are legally obliged to sign a contract, but also at situations where the contract can save you from future disputes.

Below you will find the main reasons why it is important to sign a contract and what to look out for.

1. Why should you sign a contract?

Legal obligation.

Firstly, there are cases where the law itself obliges you to have a written contract.

The general rule is that a contract is concluded by the mere will of the parties - such will can be expressed either verbally or in writing. In other words, a mere verbal agreement can be a contract.

However, there are cases provided by the law where the conclusion of the contract in written or in other forms (e.g., authenticated by a notary public) is mandatory - either for validity (i.e., in the absence of a written contract, the agreement is not valid) or to be able to prove it.

Examples of cases where a written form is required:

• assignment of copyright;
• individual employment contract;
• articles of incorporation of a company;
• commission contract;
• deposit contract;
• agency contract.

Legal protection.

Second, even if the law does not require a particular form (i.e., written, authentic), a written contract clarifies the rights and obligations of the parties and sets out their expectations.

Signing a contract can save you from / in later disputes - either by avoiding disputes or in a dispute that goes to court (litigation), where you will use the written contract as evidence.

Of course, when we want to conclude a transaction or start a new collaboration, we rely on the good faith of the other party, but even so, it should not be excluded that business relationships may deteriorate over time, in which case a written document containing all the terms of the parties’ will may prove necessary.

Besides, we always say that “a contract is essential in rainy days”.

Of course, you should also bear in mind that its content is also very important - the more clearly and precisely defined the terms and conditions of the contract are, the lower the risk of later differences in interpretation of clauses or misunderstandings.

2. What to consider when signing a contract?

Every business has its own particularities and therefore you need to make sure that the contract you conclude reflects these particularities. Also, each transaction (investment, sale, provision of services, etc.) requires a specific type of contract with specific clauses.

Here are the main things you should look out for when entering a contract:

Object of the contract.

Or, in other words, the operation covered by that contract - e.g., provision of services, assignment of shares, assignment of copyright, sale, etc. The object of the contract should be detailed/explained as well as possible to provide clarity and avoid subsequent doubt as to what is or is not covered by the subject matter of the contract.

Price.

The contract should contain the price, which is one of the essential elements in most contracts. Depending on the type of contract, you can state the price as a lump sum, per project, as an hourly rate or individualised in any other agreed way.

Price payment.

It is important to be clear about when and how the price will be paid (cash or bank transfer; in one or more instalments; currency) and any other aspects that set expectations about the price payment.

Rights and obligations.

Each party should have clarity on what they must do or must not do in the performance of the contract. Therefore, the rights and obligations of each party should be listed as fully as possible, but at the same time in a concise and precise manner. Carefully read the rights and obligations you assume by signing the contract, so that you will not have any “surprises” later.

Duration and termination of the contract.

Contracts can be concluded for an indefinite or a fixed period and, in the latter case, you can even opt for an automatic extension at the end of the initial term so that you no longer need to periodically conclude addenda. As for termination, the contract should state how it can be terminated, for example whether you can unilaterally terminate it before the end of the term or what breaches lead to recission/resolution.

Confidentiality.

If you are going to disclose certain confidential information in the performance of the contract, then a confidentiality clause is useful. This ensures that your confidential information cannot be disclosed to third parties (and will not reach competitors) or used for purposes other than those related to the contract. The confidentiality clause can produce effects even after the termination of the contract, if so agreed.

Non-compete and non-solicitation.

For certain types of contracts, such as the provision of services, these clauses can be very important. Basically, they can prohibit the other party from carrying out activities that compete with your business (whether by setting up a new competing business or holding certain positions within existing competitors). You can also prohibit them from recruiting your employees, employees, customers or suppliers.

Intellectual property.

This clause is important in any contract whose performance results in the creation of intellectual and/or artistic creations by one of the parties - for example, the development of software products, content, etc. In these cases, the intellectual property clause clarifies what happens to the intellectual property rights in the creations - i.e., whether they remain with the creative party, are transferred to the other party or are licensed.

In any case, keep in mind that most investors want the businesses they invest in to own the intellectual property rights to the software products they develop.

Force majeure.

As a general rule, force majeure is exonerating from liability even if it is not expressly provided for in the contract (it takes effect by law). However, through a force majeure clause you can determine the concrete mechanism of operation - for example, you can determine within what period it must be brought to your knowledge and by what means it can be proved.

Liability.

You can set compensation for certain breaches/non-performance - for example, you can set compensation for breach of non-compete obligation or you can set certain penalties for failure to perform obligations on time.

You can also limit/eliminate liability for certain breaches.

Applicable law and dispute resolution.

It is useful to establish at the time of signing the contract which law is applicable and which courts are competent to judge any disputes in order to avoid any subsequent discussions and interpretations, especially if your counterparty is from outside the country.

Who signs the contract.

Last but not least, make sure that the person signing the contract on behalf of your company has the authorisation and powers to do so. This can be either the company’s legal representative (i.e., director) or another person who is entitled to sign contracts that bind the company (i.e., has been mandated to do so).

Signed contract.

Always keep your copy of the contract.

3. How to sign a contract?

The type of signature you need to sign a contract with is closely linked to the legal obligation to conclude the contract in a written or other form – as indicated above.

Thus, the general rule is that when the law requires the contract to be in writing, you can validly sign it either with a handwritten signature or with a qualified electronic signature issued by a qualified trust service provider (such as CertSign). In other words, you cannot validly sign the contract with a simple electronic signature (e.g., simple electronic signature issued by DocuSign). However, you should bear in mind that there are certain documents that can be validly signed only before a notary public.

If you want to read more about the types of electronic signatures and find examples of documents that can be signed with each of them, see also our article on Electronic signatures .

Concluding a contract is an important step in establishing business relationships. Paying sufficient attention to detail and considering all the terms of the contract and their implications can help ensure a more secure, transparent, and perhaps longer-lasting collaboration or transaction. And it may also avoid potential disputes or misunderstandings in the future.

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