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It is easy to overlook certain details in your company contracts, especially when working under different time pressures. However, once you sign a business contract, you are generally bound by its terms. This is the case even if you do not read the business contract in its entirety. If you overlook contract terms that might be unfavourable for your business, this can detrimentally affect your business’ performance if you sign the contract. To help avoid this, a business lawyer can ultimately review your commercial contracts and ensure it meets your business’ best interests during the commercial arrangement.

Identifying ‘Uncertain’ Terms

Poorly drafted commercial contracts are often fraught with risks. In a contract where its terms lack clarity, this can lead to ambiguities regarding your obligations under the contract. In a similar vein, legal contracts that use convoluted jargon might also present issues with clarity. Where the terms of your contract are uncertain, this can affect your ability to enforce the contract against the other party.

Contracts can be ‘void for uncertainty’ when the subject matter of the contract is unclear. For example, if you enter into a commercial arrangement where you agree for the other party to pay you a ‘reasonable amount of the profits’, you may be unable to enforce the agreement due to not specifying the percentage share of the profits.

It may be difficult for you to identify an uncertain term in a contract. However, an experienced contract lawyer with a skilled eye should be able to identify such clauses. A lawyer can then advise you on any amendments to the agreement you should negotiate. For example, updating the definitions section of the contractual document or redrafting a specific term. This way, you can clarify your obligations under the contract and avoid entering into a potentially unenforceable contract.

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Ensuring Your Contract Is Compliant With The Law

You may have heard of the phrase ‘freedom of contract.’ This phrase speaks to the infinite amount of contractual obligations you can bind yourself to. However, a cardinal rule within contract law is that the terms of your contract must be consistent with the general law. For example, say you draft an employment contract that imposes a discriminatory obligation on your employee based on their sex or age. You will not be able to enforce the contract since this contractual term would be inconsistent with anti-discrimination legislation. Additionally, you will likely find yourself in legal trouble.

To avoid entering into a commercial arrangement that is non-compliant with the law, a contract lawyer will know the general law to help you identify any issues in your contract. This is especially crucial if your company issues standard form contracts to small businesses. From November 2016 onwards, any standard form contract that a small business enters into may be protected under Australian Consumer Law. Consumer law prevents you from misleading or deceiving small businesses, as well as attempting to include unfair terms in a contract.

A standard form contract is usually issued by one party with all the bargaining power in an agreement. This means that the parties rarely negotiate the terms of the contract. Instead, one party offers the contract to the other party on a ‘take it or leave it’ basis.

Ultimately, sound legal advice can make you aware of the wider legal limitations of your commercial contract. It can also alert you to potential regulatory issues.

Future Implications

When business owners sign a contract in the present, they may not consider how their contractual obligations will affect their business’ performance in the future. Contracts that span several years can provide your business with certainty. However, they can also constrain your business’ development and prevent you from exploring different commercial opportunities. By working with a lawyer to review your commercial contract, they can help you consider the future implications the contract will have for your business.

Additionally, a lawyer can ensure that provisions within your contract allow your business to remain flexible in its arrangements. For example, a lawyer can help you draft the terms of a termination clause, which typically include:

Ultimately, including an effective termination clause in your commercial contract can provide your business with some flexibility in the future.

Key Takeaways 

Whilst it is easy to overlook certain terms in a contract, this can be detrimental to your business. By having a lawyer review your company contract, you can ensure that:

  • you have clear obligations under the contract; 
  • your contract is compliant with the law; and 
  • you consider how the contract will affect the future performance of your business.

If you are in need of a lawyer to review your contract, LegalVision’s experienced commercial contract lawyers can help. Call us on 1300 544 755 or complete the form on this page.

Frequently Asked Questions

What are partnership agreements?

Partnership agreements manage the relationship between two or more individuals who choose to do business together.  A partnership agreement will typically specify who makes what decisions within the partnership and provides the method for resolving disputes between both partners. Partnership agreements can be vital to any new business enterprise.

What are distribution agreements? 

Put simply, distribution agreements give one party the right to distribute certain goods or services to customers in a particular area. This helps the producer and the distributor control how their goods and services are dispensed and who profits from the sale and distribution. 

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