Commercial Contracts

A commercial contract is an agreement between two or more parties, also known as a business-to-business (B2B) contract. A commercial contract may take the form of standard terms and conditions, or a bespoke, individually negotiated contract. In practice, it is common for commercial terms to be put into a standard contract which a business will use for all transactions, such as the sale of goods or services. A bespoke contract may be more appropriate for non-routine transactions, such as agency or distribution arrangements.

A commercial contract can be formed orally, by conduct or in writing. Whilst oral contracts may be legally binding, it is always desirable to record the terms which have been agreed between the parties in writing. This is because oral contracts can be difficult to prove in court. A written contract provides certainty and can be used as evidence if there is a dispute.

Most commercial contracts, whether on standard terms or individually negotiated, follow the same basic structure. It is the specific provisions which differ, according to the type of agreement reached and the underlying commercial objectives of the parties.

It is best practice to have a written commercial contract in place to ensure the parties understand their obligations and responsibilities. We structure, draft and negotiate contracts which are not only legally robust, but which help you to meet your commercial objectives.

We recommend that businesses seek professional advice when putting a commercial contract in place. Whilst it is possible to create your own contract, any terms which are ambiguous or silent on salient points will be susceptible to dispute and the interpretation of the courts. This can result in costly implications for the parties.

Unlike consumer contracts, commercial contracts have no automatic “cooling-off” period. Some commercial contracts will expressly come to an end after a fixed period. If the contract itself contains no express provision on termination, the contract may generally be terminated on “reasonable notice”. However, a party’s right to terminate is often not clear cut and may be disputed. We recommend that any party wishing to terminate a commercial contract seeks legal advice.

Business relationships may evolve over time. This can lead to the need to make changes to contracts already in place. Where a contract is in writing, it is usual for a clause to be included which provides that any changes to the contract must be in writing and signed by the parties. Where a contract has been made orally, it is unlikely that the parties will have made provision for future amendments to the contract.

If there is a dispute, the contract is the first place to look. This will usually contain a dispute resolution clause which sets out a structure for the parties to follow in the event of dispute. A poorly drafted clause can result in the parties arguing about the dispute procedure or being left with no option but to resort to litigation. A well-drafted clause can help to maintain a good commercial relationship between the parties.