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Buyer Beware of Unnecessary and Aggressive Contractual Agreements!

Posted on 02 Aug 2016

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Through my many years of business and business negotiations, I understand contracts and NDA’s are vital for participating in any potential business transaction. The most reputable businesses see more contracts occurring at the end of the business cycle, as opposed to NDAs at any point in the customer/vendor transaction. 

What you should know about NDAs

An NDA Agreement is also known as a Confidentiality Disclosure Agreement (CDA) and is a legal contract between all parties signing. The agreement will outline trade secrets, knowledge or information that is meant to be kept confidential. They are typically used to protect non-public company information. They are commonly signed when two or more parties are entering a partnership and each need to understand the others’ business.  This document is common when businesses want to work with one another but highly uncommon when being offered at the vendor/customer level.  If this occurs this should immediately throw up red flags and concerns. These contracts may prevent or limit a prospective customer to seek out any other viable options based on the terms of the agreement. 

What to look for in contracts

Contracts on the other hand, are put in place to ensure all parties are equally protected. In the software world, contracts usually state payment terms, licensing and usage. The contract should always be straightforward and easy to read.

Be on the lookout for any verbiage that is written to heavily skew the protection on the side of the vendor. In our industry, the redline process is a vital part of the negotiation cycle to ensure all parties are in a fair and equitable position. At the end of the day, if you are operating your business in a transparent manner, and have set the expectations correctly, contracts shouldn't have to be pulled out or pointed to because they are understood and agreed to on the front end. The contract should not require an attorney to review – it should be easily read and understood with clearly stated terms.

Sometimes vendors will offer a discount if you sign a multi-year contract. If you are entering a contract for more than one year at a time, be sure the value you gain is worth the commitment. In situations like this, it is extra important to read every detail of the contract to make sure you’re not getting into a situation that ends up costing you a lot of money.

Consider these 8 Things before Signing Anything!

  1. If it feels uncomfortable, go with your gut.
  2. An agreement between a vendor and a business should be mutually beneficial.
  3. Read the agreement fully.
  4. Make sure you completely understand the agreement. If you don’t, ask questions.
  5. It’s okay to say, “No thank you”.
  6. Some agreements may be negotiable so if you’re not comfortable, ask for a revision.
  7. Make sure your NDA agreement doesn’t back you into a corner.
  8. Do your due diligence. Ask about size and scope of the company. Seek references to validate vendors.
Len Summa

Written by Len Summa

Len Summa joined Data Age Business Systems, Inc. in 2012 and currently serves as Chief Executive Officer (CEO). Before becoming Data Age Business Systems’ CEO, Mr. Summa was Chief Operations Officer (COO) for four years. He has 26 years of experience in executive software solution sales and operational management for both early stage and well-established firms. Prior to his Data Age service, Mr. Summa was the General Manager of global sales and operations at Persystent Software, an industry-leading enterprise recovery software. Mr. Summa has also served as the Director of North American SMB sales and operations at Learn.com, the preeminent software firm in the learning management space. Mr. Summa has a vast business and entrepreneurial background and was the co-founder of Lou Ferrigno/Fitness Showrooms, a highly successful retail and wholesale chain located throughout the Northeastern United States.

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