5 Things You Need to Know About Commercial Contracts
1Every business has contracts. A contract is a legally binding promise that involves two or more parties agreeing to exchange something of value. Most businesses enter into new contracts each day — including with customers, suppliers and employees.
2A business can enter into contracts in many ways — including by email, orally or even through conduct. If you run a business, it’s essential to understand what you’ve agreed with other parties, so that you can effectively manage your contractual rights and obligations. For this reason, it’s best practice for a business to set out its contracts in writing.
3If your business enters into the same type of agreements on a regular basis, it’s a good idea to use standard form contracts or master agreements. Standard form contracts help ensure consistency across your contract portfolio. For example, your business might have standard sales terms and conditions for all customers and a master employment agreement for new team members. Standard form contracts also reduce the risk that a deal will fall through while you wait for the legal documents to be prepared. Standard form contracts have great benefits — but different rules may apply to them, so it’s wise to involve a contract lawyer when putting together your master agreements.
4A written contract is made up of a number of terms or clauses. Operative clauses set out the contractual rights and obligations of the parties. This includes terms that are specific to each particular transaction or relationship, as well as boilerplate clauses, which address general legal issues that commonly apply to all contracts of that type.
5In most cases, it’s possible to negotiate the commercial details of a contract before asking a lawyer to get involved. The lawyers can then negotiate the legal points and finalise the business deal in a written document. It’s important to work with a lawyer who has experience with the type of contract you need. For example, you should talk to a leasing specialist about your lease, or speak with a franchise lawyer if you need to draft or review a franchise agreement.