Zoe Watson joined Frettens in late 2022, making the Company & Commercial Team one of the most experienced in Dorset.

In this Q&A, Zoe answers your questions on making a strong business contract.

When should and shouldn’t you use a contract?

Contracts in business should be used to outline both parties’ obligations and protect your business and its legal position.

It is surprising though how many businesses are reliant on a key product, client, customer or supplier but have no written contractual arrangements in place with the person or company involved.

At least a contract with a notice period will give a grace period if the worst happens.

What should business contracts include?

Any contract should record the commercial deal which has been reached and include a clear and unambiguous description of who does what and when.

In addition, contracts should include a clear statement of what the contract provides for, the timescales that apply, what the guarantees and quality standards will be and how goods or services will be paid for.

How does a contract protect your business?

Next, consider what additional terms can be included in order to enhance the contractual and therefore legal position of the parties – and help to protect their businesses.

Appropriate inclusions depend on the importance and value of the contract from the point of view of both parties.

Here’s a checklist of terms that can help to protect your business’ legal position:

• Clear payment terms which specify dates and times for payments and how payments should be made
• Currencies used, which exchange rate will apply where (if necessary)
• Advance payment/deposit where necessary
• Interest provisions and provisions for action to be taken for overdue payments
• Retention of title
• Guarantees (such as personal guarantees)
• Any performance bonds/third party security
• Any supplier warranties and/or guarantees
• Liquidated damages
• Price adjustment clauses if necessary
• Powers of termination
• Controls may be needed regarding the supplier’s performance obligations
• Performance review and ‘best value’ clauses may also be relevant
• Limits of liability and force majeure provisions where needed
• Non-competition clauses, if needed
• Intellectual Property
• Dispute resolution procedures may also be relevant
• Dealing with specific data protection issues
• For overseas customers or suppliers, which legal system will apply

How should my business deal with contract variations?

Finally, you should consider how variations to the contract are going to be dealt with.

I recommend that any agreed variations are clearly recorded, and variations are costed out and then incorporated into the price to be paid.

I’d also suggest that any further amendments and additions are incorporated into the contract addendums so that the whole history is recorded and agreed.

What’s your advice?

In my experience, those businesses which give priority to having in place effective and modern contract terms, which can protect the interests of the business itself, appear more professional and gain respect from the organisations they deal with.

When things go wrong or threaten to go wrong, the work carried out on contract arrangements can prove decisive.

Special business contract solicitors in Dorset

Click here to read the full article. If you would like some tailored advice on your business contracts, please don’t hesitate to get in touch with our bright team.

Our team have experience in drafting effective and legally sound contracts, covering areas such as Ts and Cs, franchising, shareholder, partnership and LLP arrangements, personal guarantees and more.

You can call us on 01202 499255, or fill out the form on our website for a free initial consultation.