Getting Your House In Order: Commercial Contracts

As the second in the series from Teesside Solicitors Tilly Bailey & Irvine, Michael Stevens from its commercial team looks at how businesses can get their contracts in order and the possible pitfalls of not doing so…

The most successful businesses often build their success on the relationships that they establish and maintain with other businesses around them, such as customers, suppliers or distributors.

These relationships are important as, whether directly or indirectly, their success will influence how well the business performs.

As a result, strong personal relationships often develop between the individuals running the businesses. This is good news for business.

However, issues can arise when those personal relationships lead to parties failing to formalise the agreements between these businesses.

Business is still undertaken “on a handshake” or through trust and on occasion matters can be quickly handled in this way but quite often large commercial agreements are put in place without a proper written contract. This opens up everyone involved to significant risk in the event an unforeseen problem hits or relationships turn sour, which can easily happen (especially when large sums of money are involved).

In these unfortunate circumstances, the parties quite often have little choice but to involve solicitors to handle the disagreement, which may include the issuing of Court proceedings. This is costly, stressful and demands time away from actually running the business.

The fact is that having a solicitor draft or review a commercial contract detailing the agreement at the outset significantly reduces the chances of a full dispute arising. This generally costs substantially less than undertaking litigation and would include various protections and provisions such as:

Retention of title – which would allow sold goods to be recovered in the event that payment terms are not adhered to;
Exclusion or limitation of liability – which can protect parties and discourage others from instigating court proceedings;
Requirements for the parties to use Alternative Dispute Resolution – which would encourage proper discussions between the parties in the event that a disagreement does arise;
Payment terms – which make it abundantly clear what money is due when and prevent a party from withholding payment due to vague agreements in relation to payments;
“Entire agreement” clauses – which prevent a party from implying additional terms in the contract that were perhaps discussed as part of the negotiate but were not intended to be binding. This eliminated the cases of “he said, she said”.

Not all contractual arrangements require a bespoke single written agreement. Having a standard set of terms and conditions prepared can limit risk. Getting your contractual relationships in order with a well-drafted set of terms and training on how to ensure these are properly incorporated can prove invaluable in securing a business’ position when dealing with other parties.

If you would like to make an appointment, speak to Tilly Bailey & Irvine’s specialist Teesside Solicitors on the matters above or any other commercial legal matters by calling 01740 646000 or visit www.tbilaw.co.uk.

 

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