Contract Matters—Risk Alerts for Key Transaction Stages

Contract-risk control is an indispensable part of important transactions. This article covers signing, performance of one’s own obligations, realization of rights, responses to breach, and other transaction issues.

Signing

First identify the contract type, including framework agreements, orders, and supplemental agreements. Clearly identify the contracting parties and verify that the signatory is the same as, or duly authorized by, the contractual party.

Performance of One’s Own Obligations

Performance should be tracked by designated personnel and supported by evidence. Important stages require sufficient written records, including documents signed or sealed by the counterparty and mutually corroborating evidence. Payment recipients should also be verified. If the actual recipient differs from the contractual counterparty, obtain a written designation from that counterparty.

Realization of One’s Own Rights

If the counterparty breaches, issue timely demands or objections, especially for non-performance or non-conforming performance. Because a potential dispute already exists, act under legal guidance to preserve a favorable position. If an actual payer differs from the contractual counterparty, obtain an explanation of the reason for payment.

Responding to Breach

Clarify the breaching party’s liability and take appropriate measures whether the other party or your own side is in breach. A unilateral contract change without consent generally constitutes breach; a mutually agreed change does not.

Other Transaction Issues

Also pay attention to:

1. Complete and specific contract elements and terms, ensuring validity and enforceability.

2. Valid execution using appropriate company seals and signatures of the legal representative or an authorized signatory.

3. Consistency among the required elements of related documents.

4. Performance according to the contract, including quality standards and delivery and acceptance of work products.

5. Contract management. Establish a sound system to ensure document integrity and security, handle disputes properly, and maintain communication with legal counsel.

6. Notices and service.

Awareness of Evidence

In litigation, every item of evidence may be challenged for authenticity, relevance, legality, and probative value. Throughout formation, performance, and termination, preserve contracts and attachments, powers of attorney, delivery notes, handover records, letters, emails, and other materials.

Lawyer’s Note

Professional legal advice is crucial. Enterprises should maintain communication with counsel to ensure compliance and reduce legal risk.

Through risk control at each stage, an enterprise can manage contracts more effectively and help transactions proceed smoothly.