Do your business contracts say what you intend them to mean?
‘Of course they do’ you say to yourself…..But do they?……Think again.
All too often we see businesses becoming embroiled in disputes and litigation that could have been easily avoided if contractual documents setting out each party’s responsibilities had been clearer.
The sentence in the nursery rhyme “Mary had a little lamb” provides an abstract example of the importance of clarity in your trade agreements.
One might say that the sentence means Mary owned a young sheep. Then again, it could mean that Mary ate a small dish of lamb. However, another interpretation is that Mary tricked a naïve individual! What is your interpretation?
The point is this. The English language is open to different interpretations depending upon the context, perspective and circumstances of a particular situation. That is why it is so important to define key terms in your business terms and conditions.
Unless you define clearly what you intend your terms to mean you may be setting your business up for a contract dispute and a costly trip to the law courts.
Do you really want that?
From the contracts that we have reviewed, or court cases that we have litigated, there is a common theme that some businesses “gloss over” essential features of their trade terms and this is what gets them into trouble.
The structure of a well thought out contract will contain various clauses such as:
- The commencement date.
- The parties to the agreement – who are you contracting with, and in what capacity? For example if you had reason to pursue a claim would you be confident that you are suing the correct legal entity?
- Recitals (background) which describes the basis upon which the agreement is made.
- Engaging on your terms of business.
- Definitions and Interpretations – defining the goods and services to be supplied, and what you mean. For example “Business Day”, “Working Day” and “Business Hours” mean different things to different people so make sure that you and the other contracting party are all on the same page.
- Provisions relating to carriage, delivery, risk and insurance.
- The contract price – when payment is to be made, the method of payment, and what happens if payment is late?
- retaining ownership of products supplied to your customer.
- The Express and Implied terms of a contract – which includes the type of performance obligations that are required under the contract; when, where and so on.
- Limitation and Exclusion of liability when things go wrong.
- Termination of contract which includes the process and procedure of bringing the relationship to an end.
- The process for Dispute Resolution and how disputes are to be resolved.
Jurisdiction – which country’s laws apply especially if the contractual arrangements has an international dimension.
- Do not do business on a handshake or a “Gentleman’s Agreement” – Litigation is often brutal and unkind.
- Invest in getting well drawn up contracts.
- Get someone independent to read your terms of business.
- Avoid downloading terms and conditions from the internet.
- Review your terms regularly, and keep them up to date as your business evolves.
- Use plain simple language, but be precise.
- Ensure that your terms are easily available and brought to the attention of the other party at the time of entering into the contract.
- And finally, think about contingency plans such as ill health, death, insolvency, succession planning, and legal expenses insurance.
We have expertise in resolving contract disputes even when there is no written agreement.
Should you require further information in relation to matters arising from this article please contact Austin Ogbata on 0116 2161122 or firstname.lastname@example.org