Wait!! Before you roll your eyes and fuck off back to Reddit, I totally understand that “Read them” is shit advice. You don’t want to. You probably aren’t going to. You need something a little more useful here. Well, alright — challenge accepted. Stick with me, and by the end of this, you’ll still be ignoring contracts 99% of the time, but you’ll feel better about it. Hopefully, I’ll also have convinced you that 1% of the time you should at least skim them and look for some important parts. Sound good?

OK, you’ve got a wall of text in front of you. That wall is between you and the thing you want. Nobody ever actually climbs the wall. You want to click Accept and get on with your business. Millions of people do it all the time; clicking through is just a step you do so someone’s lawyer can sleep at night (and so executives feel validated in how much they paid that lawyer). So what could possibly go wrong? If you guessed “a lot,” you’re right!

Actual valuable piece of content #1

You can tell the 99% from the 1% by performing a Risk-Based Situational Assessment and Contract Evaluation (or RBSACE for short).

Read it when it really matters! I called it that other thing because I like to make shit up and I think that sounded fancy. What we’re really doing is looking at the key points of the relationship. The “who” and more importantly, the “what” of the deal.

What are you giving them? This is the most critical part in determining how important the contract is. As an example, let’s look at website hosting:

I want to host a simple marketing site. It’ll have some pictures, my email address, and I don’t really care about the uptime. In fact, you might not even know what uptime is.

These days, this is the equivalent of buying a candy bar. I’m not reading the ingredients or the contract. This is the 99% and is pretty unlikely to bite me in the ass later. If things get bad, I’ll just move my site somewhere else.

I’m building a totally kick-ass site — the foundation for my new online business. It’ll process customer data and I’ll be losing money every second it’s not up.

Now we’re talking about the 1%. Why? Because your ass is on the line.

What guarantees are in the contract for security and uptime? Who owns the data you host and collect? If your site generates too much traffic, can they just pull the plug on you? What if things go really wrong — can you sue them? This is the stuff of contracts and agreements. When it really matters, you need to know the answers to these questions.

My no-guarantee guarantee: 100% of the time, the long-ass contract with the big “I Agree” button is tilted 99% in favour of the person that wrote it. When there’s no button and a “by” (by registering, by continuing, etc.) that percentage goes up.

Who is involved? To me, the “who” is much less important than the “what.” There are two situations, however, that are important for you to know.

First — are you a person or a corporation? If things go wrong and actions are taken, will they be against the corporation — which provides some protections to the people/employees, or will they be against an individual — namely, you.

Second — Was it you that signed? Does it matter? Unless you’ve told your employees they are not authorized to do so, you might be on the hook. Most contracts have a section indicating that the person agreeing to it must have the authority to do so. There are many factors that come into play, but contracts agreed to by employees have been upheld as binding to the company.

Pro tip: Be explicit. To avoid a bad situation, ensure your employees know they aren’t authorized to sign agreements on behalf of your company.

On the other side of the contract is “them.” They may be a small mom-and-pop shop with a contract template they downloaded from “The Google.” They could be a giant like Facebook with lawyers out the wazoo. In the former case, the contract might not match what either of you intended, and may be missing some key parts. I’d actually count these as more important (1%) to read than the big ones.

Seems backwards right? The big companies with many lawyers and long agreements are probably stronger, more binding, etc. right? Right. But, there’s also infinitely less chance that they’ll change the agreement for you. You’re part of the masses of other people doing the exact same thing. (This is the part where it should be bloody obvious I’m not a lawyer) Curious about the contract you’re about to sign with some corporate giant, but don’t have the time to read it? I think this site has some serious potential: Terms of Service; Didn’t Read. This site takes the contracts of the big guys, digests them, and categorizes them. It will flag the things you want to be aware of when signing up.

Reading time… now what? (More valuable content)

So you’re looking at a contract and it’s worth something to you — enough that you’ve decided it needs to be read. Are you going to read the whole thing? Probably not. What you really need to know is: how can you make valuable use of your time while skimming? I’m going to break that down into two steps. What to look for and how to read it.

In the 99% example above, I said you can just move your site somewhere else. Sure, no problem… as long as you’re not obligated to stay for a certain period of time. How do find that? Start looking for words like term, termination, renewal. I’ll go into more detail about these in a bit. We’re just getting warmed up.

You’ve decided you care about the contract, now decide what specifically you care about.

When does it start, when does it stop, and how much does it cost to get out early if you need to?

Term is what I look for when I want to know how long the contract will last. When does it start? Look for things like effective date, commence, or simply start. When you combine the start date with the term, you can easily figure out when the contract ends.

Renewal can mean that your term is fixed, but the contract will live on. Renewals are very frequently automatic, and accompanied by language around how to end the contract. You’ve probably experienced this with your cellphone. It’ll renew every year, unless you provide notice 30 days before the end of the current term.

Termination. This relates to how long the contract exists for, how to end it, and what conditions are required to prevent automatic renewal. Words like “for any reason” work well for you, but beware, they may also mean the other side can walk away whenever they want. You’ll very frequently see the word breach in and around termination. Basically, if someone breaks the contract, the deal’s off, however that may cause…

Penalty. A term that may come up in more than one area, but it’s hard to imagine penalties you don’t want to know about. Find them all. In relation to the Term, you may have early termination penalties (how much it’ll cost you to get out of the contract early). There may also be penalties for late payment, breach of contract, etc. Pretty common sense, but still worth knowing.

One thing I’ll point out here: did you notice I wrote Term instead of term? In contracts, there’s almost always a section that defines words - these words have the meaning given to them in the section. This isn’t a hard and fast rule. You could be written as: “… between You and Company” or as “…between you and Company”. Both of these mean the same thing.

When things go wrong, who’s responsible, and what are the limits on that responsibility?

Liability is all about how responsible each party (people in the contract) is. You almost always see this word nestled right up next to “limitation of.” As in, we’re writing out exactly how little you can hold us responsible. Words like release, disclaim, and discharge make it in to the contract as well. When you sum it all up, it usually comes out to “you can’t sue us for a damned thing.” In some cases there will be some liability and it’ll be limited to the amount you paid for the service.

A warranty is a promise about how the thing will perform and what will be done when the thing fails to do what it’s supposed to. Obvious right? Again, in most contracts, you’re going to see this word next to no, disclaim, and expressly do not provide.

Are there any limits and prohibitions on what I can do?

I generally look for prohibited activities. These are usually pretty simple rules that boil down to “don’t be an ass.” In some situations, say payments processing, there are going to be a lot of other things you can’t do. Probably a good idea to read through them.

How do we resolve conflicts?

Dispute resolution will typically outline what happens when the two parties (you and them) don’t agree on something. Arbitration is a keyword you’ll see when you agree to keep things out of the courts. This area usually talks about jurisdiction, which probably doesn’t impact you a lot but tells you which set of rules you’re playing by. This area’s largest impact is “how much will this cost me to fight” when, or if things go wrong.

ALL-CAPS IS REALLY IMPORTANT

A relic from the olden days of paper contracts, there are legal requirements that contracts make the most important parts obvious. I’ve started to see THE ALL CAPS SECTION be replaced with text that’s otherwise marked as very important. Disclaimer of warranty and limitation of liability are the go-to content here. This is where the lawyers go all out with the legalese and wipe away any chance that you’ve got of holding anyone with a tie to the contract responsible for pretty much anything.