Commercial Contracts: Things to Avoid and Legal Complications

1. Commercial Contracts: Things to Avoid and Legal Complications Commercial contracts are an essential element needed to protect businesses. The increasingly litigious environment has made it crucial for business owners to have a better understanding of local commercial law and the principles guiding commercial contracts. And so, you must keep pace with today's regulatory and general business uncertainty to ensure your commercial contracts accurately capture your business arrangements, protect your interest, and minimise commercial litigations. Read on to find out exactly what a commercial contract is, its purpose, and essential clauses to add to your commercial contracts to avoid legal complexities. What is a Commercial Contract? A commercial contract can be defined as a legally enforceable agreement regulating business relationships between two or more parties.

2. Commercial contracts are sought after as they define and regulate business relationships. From standard employment agreements to more complex ones like supply agreements, joint venture agreements and complex lease documents-- commercial contracts can be versatile. Commercial lawyers well-versed in local commercial law draft contracts informing stakeholders of the terms, obligations, and dos and don'ts of upcoming engagement(s). Usually, commercial contracts are in writing, but there can also be a verbal agreement. It's easier to enforce a written commercial contract and guide the parties on performing their obligation under the transaction. Some common examples of commercial contracts include: ● Launching a joint enterprise ● Acquiring a company ● Shareholders agreement ● Purchase and supply agreement, etc. What is the Purpose of a Commercial Contract? Whether you are running a small business in Australia or a large enterprise, its success significantly depends on well-drafted commercial contracts. So, consider searching "business lawyer near me" and hire a professional capable of drafting commercial agreements that accurately capture your Sydney business arrangements, protect your company's interest, and limit your liability. A commercial contract can play the following discussed roles in business operations: ● Define rights and obligations A commercial contract helps define the rights and obligations of each party involved in the business arrangement. It specifies the terms agreed upon to let parties know their responsibilities. ● Provide a reference for dispute resolution It's common to have disputes when running a business. Whether contractual parties try to resolve disputes via litigation or themselves, the commercial contract will be used to determine the party or parties at fault. ● Protect business interests A commercial contract can allow companies to protect their interests and minimise risk from dealing with other parties via a confidentiality clause, an indemnity clause, or any other means.

3. What are the Risks Associated with Commercial Contracts? Sometimes, commercial contracts are not performed as expected, or not by a professional, resulting in significant financial consequences. Below given are some common types of commercial contract risks: ● Legal Risk: These risks can include breach of contract or infringing on intellectual property, exposing you to litigation. Financial Risk: This contractual risk involves monetary loss affecting your company's top or bottom line. Financial risk can be caused by third-party bankruptcy, missing key contract dates, etc. Security Risk: This risk occurs when details of commercial contracts are accessed or disclosed to unauthorised parties such as cyber criminals. ● ● What Contract? Standard Clauses Should be Included in a Commercial You can avoid the above-discussed risks of commercial contracts by including some vital clauses per your country's commercial law. Here listed are some standard clauses you should consider adding to your commercial agreement: ● Confidentiality The confidentiality clause asks the contractual parties not to disclose sensitive information about commercial contracts to unauthorised individuals. With this clause, confidential information such as intellectual property, business dealings, or similar entries is kept out of the reach of the public. ● Dispute Resolution A dispute clause is specific to how parties in the agreement can handle disputes in case there is some conflict among them in the future. Including this clause in the commercial contract is essential as it helps companies avoid litigation to a greater extent. ● Indemnity Clause The indemnity clause states the compensation that one party needs to pay to another in the event of a loss. Simply put, with this clause in place, your company can get compensation for liabilities upheld by the other faulty party. ● Termination Clause

4. With a termination clause in place, the contractual parties can know whether they have the option to end the contract during acquisitions or breach of contract, freeing themselves from the obligations that were initially accepted or how long the contract will run once a notice of termination is given. This clause also specifies the circumstances that could lead to the termination of a commercial contract or whether a party can terminate the contract without cause. ● Jurisdiction If your company is involved in frequent cross-border transactions, you should add a jurisdiction clause when signing a commercial contract with another party or parties. This clause allows the commercial contract to explicitly state which jurisdiction law governs the agreement. Now that each country or state's governing laws differ, the jurisdiction clause can bring clarity and offer legal protection to both parties. ● Force Majeure With a Force Majeure clause in the commercial contract, you can outline the action to be taken when any party(s) cannot meet its obligations for reasons not within human control. For example, the other party might not perform its obligations due to natural calamities or similar catastrophic events. In such a situation, not yielding promises or failing to fulfil obligations is not considered a breach of contract. What are the Key Practices to Follow When Drafting Commercial Contracts? The following are some essential practices you should follow in drafting a legalised commercial contract: ● Have a professional help you carefully prepare a commercial contract to reflect the parties' intentions accurately. ● Review your commercial contract regularly because circumstances, financial climate, and parties' situations can change, making the agreement terms no longer viable. ● Multiple new competition laws apply to commercial contracts, including consumer protection laws or unfair contract terms. Be aware of such laws and the obligations they can impose on your business.

5. In Conclusion Regardless of the size of your organisation or the industry in which it works, it's imperative to carefully draft a commercial contract and check it rigorously before signing. Any term, obligation, or right should be written clearly as the meaning of a term cannot be ascertained within the body of the contract it will be unenforceable and external factors will only be considered in limited circumstances. Your best chance to draft an accurate commercial contract is to search for a professional "business lawyer near me" and hire an experienced legal professional in Australia to ensure you’ve got absolutely everything covered. Contact Us Name: Sydun & Co Solicitors Address: Level 6, 162, Goulburn Street, Surry Hills, NSW, 2010, Australia Contact No: (02) 9283 2355 Website: https://www.sydunco.com.au/