10 Signs You're in a Shady Contract Negotiation
I totally get it - you're in a sprint to close on a deal to enable some awesome new endeavor you're involved with. The finish line is within sight, but you're feeling a nagging itch to ensure that your rights are protected and formalized on paper.
Kind of like a doctor's office, my law office usually sees clients when there's a "problem"..and after nine years of business, the problems I see clients approach with regarding signing (or trying to "un-sign") contracts are often the same. To be fair, a strong amount of contract negotiations involve good faith people and purposes, with collaborative fair teams and attorneys.
But don't be fooled for one bit - there's no shortages of contracts I've seen that have bad intentions, and many with downright unconscionable terms if you don't have an attorney involved to help negotiate your rights.
I like to go into contract negotiations with as open a mind as possible with a hope that everyone will "play" fair and professional, but there are clues I've seen repeated over time that set off a bit of a red flag. Here's 10 classic red flags I've seen far too often, which might ultimately prove that you're involved in a shady contract negotiation:
1. The other side tells you its easier not to get lawyers involved.
What this usually means, is that it's easier for "them" if lawyers don't get involved, because they probably either don't want to commit to anything formally in writing, or if they do- they want the terms to be completely one sided and not in your favor, at all.
2. They tell you that they do their deals without written contracts
Sometimes this isn't a "shady" red flag, but definitely raise an eyebrow if you hear this. Remember: if a deal isn't signed to in writing, you have no way of proving what each side promised to do. So for example, if they promised you "x" amount of money without that stated in writing, they're asking you to take an uncomfortable leap of faith that they'll pay you. And if they don't pay you - you have no way of proving what you're owed, or getting that money definitively paid to you.
3. They get hostile when you do get an attorney
No one should ever be belittled, harassed, or made to feel wrong for having an attorney review a deal for them. I've sadly seen many instances where the other side to a deal learns that an attorney is reviewing a contract, and they respond with extreme hostilities about it. That's probably one of the biggest red flags that the other side is intending to take advantage of you and essentially "gaslight" you into believing hiring an attorney is wrong. If the other side wasn't intending to take advantage of you or give you less then a fair and good-faith deal, then they wouldn't have a problem with you getting an attorney to review your contract.
4. They go silent for too long
It's not uncommon for 2 lawyers negotiating a deal to encounter some lapses of time between communications. Most lawyers are managing multiple client matters that can go from zero-to-360 at any given time without notice, and so often times a law firm will mostly be striking a balance between ensuring client matters are dealt with timely, while ensuring extremely time-sensitive matters are prioritized. That said, look to your lawyer to get a compass as to if the other side is taking a little too long to respond to a set of edits in a contract negotiation. Sometimes these long lapses are completely innocent, but there are plenty of times when the silence is because the other side is deciding to do something completely against what was originally planned, and is exploring how to do so somewhat gingerly with you.
5. The contract looks absolutely nothing like what was casually discussed
Remember that "simple" deal they said would happen? - its not so simple when it shows up as a 30 page contract with super fine print.
6. They have a random bat-sh*t crazy clause in the contract that they refuse to change, and claim its "standard"...
So sometimes people make the mistake of working off of a boilerplate contract they found on the internet for free, that might have some of the right language needed for a particular deal, but which might also come with other unintended language that is overly stringent, harsh, or completely irrelevant to your needs. When this happens, your lawyer would of course point this out to the other side, in the hopes they'll see this and remove it. BUT if the other side is put on notice of this, and refuses to change it, its a shady Red Flag. WORSE is if you're dealing with a "big brand" or major company with sophisticated attorney's in-house who give you a story about it being "standard language" that they "can't" change. Make sure your attorney gives you their opinion on the contract as a whole, to know if the clause is too much of a risk for you to accept.
7. You don't have the right to sue them
You may find this ironic that i'm saying this as an Attorney, but I can wholeheartedly say that litigation SUCKS. It's probably one of the most soul-sucking experiences in the world, and even if you win your case, often times you're probably so mentally spent from the experience, that it might make you wonder if it is was worth it. That said, there are plenty of VERY worthy cases that are absolutely justified in pursuing that could sometimes leave millions of dollars on the table if they're not brought to court. I've sadly seen many contracts where the other side is requesting that you don't have the right to "sue" them if a problem happens.
Now: if they have a required arbitration clause, (as opposed to litigation clause) that can be ok, and sometimes a much better option than traditional litigation. But if they are requesting you to sign a contract stating you would have ZERO recourse in litigation/arbitration period, guess what: its SHADY.
8. They want one-sided indemnity
In an overly simplified explanation, an indemnification clause is language in a contract that essentially says that you'll assume liability for the other side, if you do something that gets them in trouble (i.e. your conduct or lack thereof gets the other side sued). It is rather common to see an indemnity clause in a contract when you're involved in a collaboration, but if the other side wants YOU to be the only one who agrees to indemnity, and isn't open to making it a mutual clause - that's pretty shady. The important thing with deciding the extent of "shade" with a situation like this, is for your lawyer to give feedback on the contract as a whole. So while it is a red flag, it would need to be considered in light of the entire deal, to see how balanced this would be if they won't agree to make the indemnity mutual.
9. They're the only one who has the right to termination
I usually prioritize two important things when negotiating a contract for a client:
(1) Making sure it's crystal clear how much money is being exchanged in the deal, and, when it will be exchanged.
(2) Making sure there's an easy, stress-free exit plan for my client, in case the deal goes sour when the collaboration begins.
If the other side wants to FULLY lock you in the contract, meaning: they carved out a simple way to end the contract, but you can't do the same? It's definitely a red flag having a bit of shadiness
10. They don't send back a mutually signed copy of the agreement
You'd like to believe something as simple as getting a returned signed contract would be just that: simple. But there have been some instances where the other side doesn't send back a signed copy of the agreement that you might have signed first. Now this really needs to be explored on a case by case basis so please don't freak out if you're in this situation, but rather, speak with an attorney for your specific situation. But it could be a way for them to lock you into what you promised to do, without formally locking in themselves if they don't send you back an executed copy.
Have a contract you're working on that might have one or more of these red flags? Reach out to let us know if we can help. Send a note to firstname.lastname@example.org
Disclaimer: because -- we have to (sigh):
The views presented are the views of Mita Carriman Esq. This article does not replace or constitute legal advice of any kind, nor does it create an attorney-client relationship. You are advised to seek the help of a licensed attorney to help you with your unique and specific situation.