Are your commercial contracts in order?
At all stages of a business’ life cycle, commercial contracts are required in order to govern the relationship between business and external parties. In practical terms, the most opportune time to put in place your commercial contracts is when the business is being set up in its growth stage. However, it is important to review commercial contracts regularly to pick up any legislation changes, industry standard practice changes and to ensure the commercial contracts cover all points required as the business grows.
As an example, think about what is required for a new business. You may need contracts for office supplies, maintenance of IT systems, software licencing and accounting systems, data protection policies, terms and conditions and contracts between you and your clients. These are all documents which will need to be considered and by ensuring the correct documents are in place from the start, you can minimise the risk of any issues arising in the future.
Having an agreement in place will make enforceability of its terms much easier and can help to ensure parties meet their obligations on time.
You may need to consider:-
- Who, what, where, when? Who is responsible for the performance of the contract, what is expected of them and where will this be carried out? When is the performance expected by? Ensuring your clients know when to expect goods and/or services to be finalised is important in order to ensure deadlines are met.
- Payment obligations: Is payment for your goods and/or services to be made in full or will you allow your clients to pay in instalments? Do your quoted prices include VAT? How will you deal with late payments?
- Precedence of terms: Often suppliers and clients (business clients) may have their own terms and It is important for the parties to agree whose terms take precedence so that any future disputes can be settled quickly.
- Intellectual property rights: Which party will own any IP rights that exist? Which party will have the right to continue using the IP when the business relationship comes to an end?
- Ownership: For the sale of goods, it is important to consider when ownership of the item will pass, and who will be responsible for the goods throughout the delivery process. Will the item be the responsibility of the client from the moment it leaves your premises, or from the moment it arrives at theirs?
- Liability: If something goes wrong, who is liable and what is the maximum amount that can be claimed? How will a party get its money back? You should consider capping your liability to a commercially acceptable level.
The above are just a few points to be considered when entering into/drafting a commercial contract. It is also essential that the commercial contracts contain appropriate terms for a client’s relevant industry and that each contract is individually tailored for the specific requirements of a client’s business.
If you have any questions or would like help with drafting commercial contracts, please get in touch with me or anyone else within the Corporate Commercial team on 01256 320555.
Corporate Commercial Solicitor
Please note this article and its contents are for general information purposes only and do not constitute legal advice. We recommend speaking to one of our legal professionals to gain advice in relation to a specific matter.