A written contract should be the cornerstone of any commercial transaction. It not only creates a legally binding agreement between two or more parties; it also formalises and regulates various aspects of the relationship like service levels, payment terms, and how disputes are to be resolved.
We’d all like to think that deals are negotiated and agreed on by the nod of a head and the shake of a hand, a gentleman’s agreement based on a solid foundation of ethics, integrity, and trust. The truth is, though, that modern business dealings are often complex, can span continents and involve many different parties, each with their own commercial aspirations and agendas. A gentleman’s agreement is not a suitable option for safeguarding your business’s interests.
You and your business, no matter how big or small, can only benefit from the security and protection afforded by a formalised agreement between parties. Due to internal regulatory requirements and often stringent fiscal and compliance safeguards, it would be unusual for larger organisations to conduct any business with other parties before the elements of a contract have been negotiated, agreed upon, formalised and fully executed by duly authorised representatives from both sides. This is a practise smaller business, including start-ups, would be well-advised to heed.
Sound commercial and legal advice is highly recommended when considering entering into a contract. A business lawyer is best placed to advise you on both the legal and strategic aspects of a contract as it pertains to your business and business needs. Contracts can raise a wide range of issues, so it’s important to have a business lawyer or a commercial lawyer by your side to highlight potential risks and offer mitigating solutions.
It would be impossible to draft a contract that can mitigate against all potential risks and govern all aspects of the contracting parties’ relationship but, as a legally binding document, it affords the parties a degree of commercial protection and security in the event of disputes, force majeure, material breaches, and liability and would typically set out how these will be dealt with and resolved.
A seasoned commercial lawyer will have a wealth of experience across a wide range of business sectors to give you personalised commercial and business advice on the many different aspects of contracts and their terms. So, whether you run a burgeoning empire or an innovative start-up, keep a finger on the business pulse by bedding down those confidentiality and penalty clauses, limiting those liabilities and teasing out the warranties. This will help you to formalise relationships, mitigate risks and protect against financial exposure.