Commercial Contract Basics: What’s in a Contract?
Virtually every commercial transaction entered into has, at its base, a commercial contract. Commercial contracts can be written, verbal or implied from conduct in a formal or an informal manner. Contracts are essential when it comes to running a business or commercial practice, because it lays out the basic terms and conditions of your transaction , and what you and other parties involved are obligated to do by law.
Here at Gillespie Young Watson, we are commercial law experts, having created professional, all-encompassing contracts for many businesses in the greater Wellington area and throughout New Zealand. If you’re considering writing a contract, or want to get one written for your company, it’s important to know the essentials of a contract’s contents.
So, what’s in a contract? We break down some of these essential Commercial Contract Basics below.
Rights and Obligations
Contracts are legally-binding agreements between parties, where the parties involved are legally obligated to do or restrain from doing particular things. This includes the parties’ rights, such as receiving products in good condition or receiving timely wages, as well as their obligations to conduct themselves in a certain manner. Once a contract is signed, these rights and obligations then become enforceable by the law.
Ideally contracts ensure that the outcomes both parties wish to achieve are adequately dealt with, and address the specific commercial circumstance. This can involve making sure that obligations are limited, as well as conferring rights and entitlements that place the party in the optimum position if a dispute arises.
Anticipated Risks
Often there will be contingencies or unforeseen events that clients have not anticipated. Lawyers are trained and experienced to anticipate these risks, especially when these risks are threatening to the business’ integrity, and then address them accordingly. Examples of risks can be confidentiality breaches, or poor provision of services.
Risks must be addressed in advance in a contract. An example is the inclusion of warranties. This means both parties have carefully thought about what could possibly go wrong, and where the responsibility lies to fix any issues that may (and do) come up in the future.
Particular Features
Each commercial contract has its own particular features reflecting the nature of the transaction, and for any given commercial contract there are customary provisions either included or implied. The terms of a contract can be generic, for example through terms of trade, conditions of sale or in a written contract for the sale of goods or the provision of services. Commercial contracts are also generally overlaid by statutory laws, including the Fair Trading Act and the Commercial Contracts Act.
Commercial contracts help businesses regulate their relationships, so transactions can be predetermined and enacted in the business’ favour. It is often in the interest of one or both parties to have the terms of the contract clearly recorded. Professionally drafted contracts are void of any authorised loopholes, ensuring a business retains its aggressive edge while providing the promised quality of service stated within the contract.
The cost and effort of properly documenting commercial contracts is considerably less than the cost of litigation where contract breaches or disputes arise, so it’s vital to prepare for the future.
Here at Gillespie Young Watson, we can help your business achieve contractual certainty with expert commercial contract drafting and negotiation. Let our team of commercial lawyers assist you and Contact Us today!
