Business relationships often begin with trust. A customer places an order, a supplier promises delivery, or a consultant agrees to provide services. Problems arise when the parties later disagree about what was promised, when payment was due or who was responsible for a particular obligation.
A clear written contract can reduce these uncertainties.
What should a business contract contain?
The contents depend on the transaction, but a well-prepared agreement will commonly address the following:
The parties: Identify the correct individuals or legal entities entering into the agreement.
Scope of work: Describe the goods, services or other obligations being undertaken.
Payment terms: State the price, payment milestones, invoicing arrangements and consequences of non-payment where appropriate.
Timeframes: Specify delivery dates, completion milestones and any extension procedures.
Responsibilities: Clarify what each party must provide or do for the agreement to proceed.
Dispute resolution: Set out an appropriate process for addressing disagreements, subject to applicable law.
Termination: Explain when and how the agreement may lawfully be brought to an end.
Are verbal agreements enforceable?
Some oral agreements may be enforceable, depending on the applicable law and the circumstances. However, certain transactions must satisfy specific formal requirements.
For example, contracts for the disposition of an interest in land are subject to statutory writing, signature and witnessing requirements.
Businesses should therefore avoid assuming that a verbal understanding is sufficient for every transaction.
What happens when a contract is breached?
A breach may occur when a party fails to pay, deliver goods, complete agreed work or perform another contractual obligation. The available remedies depend on the agreement, the nature of the breach and the applicable law.
Maintaining signed agreements, invoices, correspondence and performance records makes it easier to establish what occurred.
Protect your commercial relationships
A well-drafted contract does not eliminate every risk, but it helps establish expectations and provides a clearer basis for resolving disagreements.
Asembo and Company Advocates can assist businesses with commercial agreements, contract reviews and contractual dispute resolution.
