The same method applies to founders’ agreements, wills, powers of attorney and tenancy paperwork. The documents differ, the discipline does not: identify the parties, the obligations, the money, the exit, and the signatures.
How do I read a contract clause by clause before signing it?
Start with a printed copy and a pen. Read the definitions first, because defined terms carry meaning across the whole document. If "Services" is defined narrowly, a broad-looking scope clause may promise less than it appears to.
Then read in this order:
1. Parties and capacity. Check the legal names, registration numbers and addresses. A contract with the wrong entity is a contract with the wrong entity. 2. Scope and deliverables. Underline every verb: deliver, maintain, provide, support. Note what is excluded. 3. Payment. Amount, currency, invoicing trigger, payment period, late fees, expenses, and who bears bank charges. 4. Term and renewal. Fixed term or rolling, notice period, and how notice must be given. 5. Termination. Who can end it, on what grounds, and what survives termination. 6. Liability and indemnities. Caps, exclusions, and whether they are mutual. 7. Confidentiality, data and intellectual property. Who owns what is created, and what happens on exit. 8. Boilerplate. Assignment, variation, governing law, jurisdiction, entire agreement, notices.
For each clause, ask three questions: what does this require, what happens if it is breached, and can it be changed later. If the answer to the third is no, the clause deserves a second reading.
Keep a one-page summary next to the contract. It should list the parties, the money, the dates, the notice periods and the exit routes. That summary is what you will actually use in six months, when the contract itself is in a drawer. Guidance on structuring that summary, and on the documents that sit alongside a contract, is collected at legal kits for everyday documents, which covers contracts, company formation and personal paperwork in English.
What has to be in a founders’ agreement to avoid a dispute later on?
A founders’ agreement is not a substitute for the company’s constitutional documents, but it should record the decisions that founders most often disagree about. At minimum it should cover:
- Equity split, including the difference between shares issued at incorporation and shares promised later.
- Vesting: the period, the cliff, and what happens to unvested shares if a founder leaves.
- Decision rules: which matters need unanimity, which need a majority, and who breaks a tie.
- Roles and time commitment: who is full time, who is part time, and what happens if that changes.
- Intellectual property: assignment of work created before and after incorporation.
- Money: salaries, dividends policy, expense approval, and what happens if one founder funds the company.
- Exit: drag-along, tag-along, rights of first refusal, and valuation method.
- Dispute resolution: governing law, jurisdiction, and whether mediation is required first.
The most common failure is silence on vesting and on leaver provisions. A founder who leaves in month three with a third of the equity is a problem that a two-page clause prevents. The second most common failure is a decision rule that nobody wrote down, so every disagreement becomes a negotiation about process rather than substance.
Write the agreement in plain English, date it, and have every founder sign and keep a copy. If the company has already been incorporated, check that the agreement is consistent with the articles of association; where they conflict, the constitutional documents usually win.
Which documents should be prepared and checked before signing or archiving?
The list depends on what you are doing, but four categories cover most situations.
Business formation. The incorporation documents, the shareholders’ agreement or founders’ agreement, any intellectual property assignment, and the register of members. Check names, share classes and numbers against the actual filings.
Service contracts. The main agreement, any statement of work, the order form, and any data processing agreement. Check that the documents refer to each other correctly and that the version you sign is the version you read.
Personal documents. A will, with an inventory of assets and named beneficiaries; lasting powers of attorney for finances and for health and welfare; and, where relevant, a letter of wishes. Check that the executor and attorneys have agreed to act, and that the document is signed and witnessed as the jurisdiction requires.
Tenancy paperwork. The tenancy agreement, the inventory and schedule of condition, the deposit protection certificate, and any renewal or variation. Check the deposit amount, the prescribed information, and the notice periods for ending the tenancy.
Before archiving, do three things. Scan the signed version, not the draft. Store it where you can find it by name and date. Diarise every deadline the document creates: renewal dates, notice periods, payment dates, review dates. A document that is filed but not diarised is only half kept.
How should amendments and renewals be handled?
Amendments should be in writing, dated, and signed by the same parties who signed the original, or by someone authorised to sign for them. A short amendment document is usually better than marking up the original, because it leaves a clear record of what changed and when.
Each amendment should state: the parties, the agreement being amended, the clause numbers affected, the new wording, the effective date, and the signatures. If the amendment changes money or term, check whether any related document, such as a statement of work or a guarantee, also needs updating.
For renewals, check the notice period in the original before you assume the renewal is automatic. Many contracts renew unless notice is given, which means the deadline is the date by which you must act, not the renewal date itself. Put that date in a calendar with a reminder two weeks earlier.
What are the common mistakes when reading legal documents?
Reading only the clauses you expect to matter. The clause that causes trouble is often the one about notices, assignment or entire agreement.
Signing a version that differs from the one you reviewed. Compare page counts, clause numbers and dates before signing.
Assuming verbal assurances will be honoured. If it is not in the document, it is not in the contract.
Ignoring the definitions. A defined term can narrow an obligation that looks broad in the body of the text.
Filing without diarising. The document is only useful if you know when it requires you to act.
Skipping the signature block. Check who is signing, in what capacity, and whether a witness or company seal is required.
None of this requires a legal qualification. It requires a printed copy, a pen, a fixed order, and the patience to write one sentence per clause. Where a clause resists that treatment, that is the clause to ask about before signing.