Commercial Contracts

No, contracts do not have to be in writing to be legally binding. However, if you don’t put the terms down in writing, then it can be difficult to evidence what was actually agreed. So, although a verbal contract is completely binding under English law, it’s clearly much more useful to have a written record of your agreement.

Contracts which are made by email are equally valid. Again, so long as the terms which you have agreed are clear, then there should be no problem enforcing the contract.

The answer is, it depends. Some agreements are quite standard, such as a simple NDA or Confidentiality Agreement. Others are more complex and need to be written to accurately fit your circumstances. It may be tempting to try to save money by using an ‘off the shelf’ agreement. However, it only takes one mistake in the contract to make the whole thing very costly to deal with. It’s therefore worth spending a little extra to make sure you get it right from the start. It means that you can sleep at night and keep your business on a solid footing.

Although you may be presented with ‘Standard Terms and Conditions’ by a business partner, or even a contract drawn up by their solicitor, it is always worth having the terms reviewed by your lawyer. Firstly, you need to check that the contract terms on offer actually apply to your situation. It is not unheard of that a business may just find an old contract on the internet and try to use it for a situation that doesn’t fit.

Secondly, its important to check for the ‘deal-breakers’. That means, rather than spending hours pouring through each word, your solicitor simply focusses on the main two or three clauses which are likely to cause you a problem. To do this properly, your solicitor will need to understand your business and what you want to get out of this contract.

This way, you can quickly get peace of mind, at an acceptable cost.

The main terms you need to watch out for will obviously depend on the type of contract you’re entering into, and what you want to get out of the transaction. However, there are some terms which are quite likely to be relevant in many commercial contracts.

These include restrictions on liability, intellectual property rights and termination provisions.

If you’re providing good or services, then there’s a chance you can be sued if something goes wrong. Your liability, unless you cover it correctly in the contract, could be unlimited. Sensible provisions to include here would be a liability cap and limits on the type of claims which may be brought.

Intellectual property rights, and who owns them, may well be important areas to cover in your contract. Apart from protecting the existing intellectual property rights of each of the parties, the contract should also deal with what happens to any new intellectual property which is created through the transaction.

Finally, termination provisions can be crucial to be able to exit a contract which is not working. Without the ability to end the contract, a party can find itself tied in, and forced to buy itself out of the agreement – if it doesn’t want to face a claim for breach of contract.