Top tips to reduce legal costs and prevent contractual disputes20-July-2017 Commercial Disputes By Mel Collins
Many businesses enter into commercial contracts every day in delivering their services and products. If managed correctly, contracts can be a great mechanism to detail the work to be undertaken, the role of each party and the agreed price.
However, when there is a variation to a contract, which is often oral in nature rather than written, disputes can arise. This can result is significant legal fees being incurred by both parties as they attempt to resolve the issue.
Below are our some helpful tips regarding what to include in a contract to prevent a dispute occurring and some of the legal considerations regarding the enforceability of contracts.
Terms and conditions – what should I be including?
- The terms and conditions of your business should essentially be a manual for how you do business. It should provide a course of action regarding what will happen in different situations, such as one party wanting to exit the agreement, or the scope of work being varied by either party. The specific components to include depends on the nature of your business.
- Your business should have some key terms and conditions that can be expanded upon, and in the circumstances, have the ability to be varied on the spot.
When is an agreement legally enforceable?
- Irrespective of whether your contract is verbal or written, if you have agreed to provide a service or supply a good for consideration, you have entered into a contract.
- Sometimes an oral contract takes place in order to get started as quickly as possible on the agreed work, however, it is much safer to have a written contract, rather than relying on your recollection of the oral conversation with the other party.
- If you do form an oral contract, and either party suggests a variation to the contract, make sure you record the conversation, what was said and the outcome in a diary.
- It is important to note that an agreement is not always legally enforceable. This is called an “Absence of consideration” and usually occurs when there is no provision for money being exchanged in the agreement.
What happens if I don’t have a written contract?
If you do not have your agreement or contract in writing, you are exposing yourself and your business to a range of avoidable risks. These include:
- the risk that you, or the party to whom you made the agreement or contract with, do not understand the scope of work to be undertaken and specific tasks to be completed.
- the risk of a dispute down the track as to what exactly was agreed on, and in the absence of a contract, you will each be relying on recollections of what was said or agreed to.
In the event that a dispute arises from a contractual relationship, it is important you minimise the legal, commercial and reputational risks to yourself and your business.
If you are considering entering into a contractual arrangement with a business or an individual, Streeterlaw can assist you in drafting clear, commercially focussed contracts that minimise risk and provide for dispute management. We can also work closely with you to adopt comprehensive terms and conditions for your contracts.