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Your commercial contracts questions answered

A contract is a legally enforceable arrangement. Each party promises to do something in return for something from the other party. At the simplest level, a contract could be based on a promise to pay money in return for goods or services. However a contract can involve a much more complex arrangement, such as a lengthy and detailed set of rules about how two parties will collaborate to establish and operate a new business venture.

The short answer is no. The law does recognise contracts that are formed based on things said and done by parties, even if nothing is written down. But if there is a dispute, there will be no independent record of the terms of the contract. It may be very difficult for one party to prove what the contract requires when the other party provides a very different version. The safest approach is to always make sure that your commercial contract is written, signed, and worded precisely.

A good first step is to agree on commercial terms with the party you are contracting with. Things like fees, the length of contract, and the region or territory where the contract will apply. With this information, your lawyer will be able to prepare a “first draft” that can be sent to the other parties for their comments and changes. With simple contracts, final wording can be agreed a document signed after just one or two rounds of changes between the two sides. However if your agreement is complex and detailed, you may need a few more rounds of changes before all parties are happy with the wording.

No. If there is a type of agreement that you expect to be using repeatedly, preparing a template version could be efficient, and cost-effective. The aim is for main the body of the contract to include all those terms that are standard and are unlikely to change. The “schedule” at the end will include all the items that typically vary – like length of contract, amount of fees, the region or territory that will apply, and any other specific terms that are negotiated cases by case.

Your rights will depend on what is contained in the contract. Many contracts include a right to be compensated called an “indemnity”, which should allow you to claim compensation without having to terminate the contract. Without an indemnity, compensation is usually only available if you first end the contract. If you believe that someone has breached your contract, it is very important to obtain legal advice. Because after a breach, every small step you take (such as writing an email or making a phone call) could significantly affect your rights later on.

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