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Contract Drafting

Most businesses and individuals require contracts and these need to correctly drafted (or written) so that the terms are clear and don’t give rise to disputes. This is one of the most important aspects when writing contracts and is much more difficult than it sounds.

Getting the right agreement or contract drafted and to negotiate the terms of the agreement or contract require skill and lateral thinking. The contract is there to benefit both parties and should work to be legally binding, clearly set out the responsibilities and prevent disputes arising.

Contracts have essential elements and a skilled contract lawyer will be able to ensure to make your contracts binding and legally enforceable and that those elements are incorporated.

Types of Contracts we can assist with range from employment agreements to sale of business contracts to commercial supply agreements.

Contract Law is vast and covers and crosses many other laws as well. Employment contracts cover many different laws from employment law to anti-discrimination. One of the most common elements of contracts for businesses is the Australian Consumer Law (ACL).

Australian Consumer Law (“ACL”)

If require contracts for your business as a standard form, then you they will need to comply with the ACL. The most relevant is the protection for consumers from unfair contract terms in the ACL. A contract lawyer will be to advise you on your business contracts so that your business is protected, and the terms are fair. Having the right contracts will make dispute resolution faster and offer you greater protection as your business clients will not be able to easily terminate the contract.

Contract Negotiation

Often there is a long negotiation process that takes place between parties with contract preparation and this is another soft skill that your lawyer should possess. This skill together with your lawyer’s experience in drafting contracts will put you in the best position when entering in to or negotiating a contract.

When writing a contract it is important to go methodically through the steps to ensure that all the relevant information is contained in the contract. The contract should represent the full agreement between the parties. Your lawyer will also have to consider all the other factors that might give rise to a dispute and ensure that the contract covers those events.

Verbal contracts are legally enforceable, but harder to prove, which is why they should all be in writing. Some contracts must be in writing such as Contracts for the Sale of Land pursuant to Section 146 of the Victorian Sale of Land Act.

Once the fact-finding stage has been done and established the purpose of the contract the terms and conditions can be clarified as the contract is drafted. Depending on the complexity and the uniqueness of the arrangement will determine how long this process takes.

The fact-finding and understanding the context of the agreement is a crucial element. This is also true of the experience level and drafting experience of the lawyer to get the best possible outcome.

It is important that for business contracts not be drafted from templates and that proper consideration is given to what the extent of the business relationship is. In most instances there are many scenarios to be considered and this is where a lawyer with litigation experience is also helpful, so that the known pain points and frustrations can be covered off sufficiently in the contract to help prevent disputes.

The basic elements to form a contract are:

  • Invitation to Treat – this is literally the “invitation” to do business together – eg., an advertisement.
  • Offer – one party must make an offer.
  • Acceptance – the offer must be accepted.
  • Intention to create a legal relationship – it must be clear that the parties agree to form a legal relationship.
  • Consideration – a form of payment is required to make the contract binding on the parties and this is typically by way of the payment of a deposit.

The negotiation of terms of the above and the execution of the agreement are important.

 

Some issues that should be carefully considered by your contract lawyer are:

Assignment or Nominations

These clauses should be considered if the relationship needs to be transferred to another party if you sell the business or there is a change of ownership in the future. If your business relies on contracts it is important that if you sell your business that these contracts can be transferred as well.

Restrictions

Quite often restrictions are in place to limit the parties and their rights.

Restraints of trade

Restraints of trade are typical clauses in employment agreements and other business sale agreements preventing the parties from competing with you directly after the contract is terminated. When drafting restraint of trade clauses in contracts careful consideration must be given so that they can be upheld if challenged.

Location and Territories

There are many disputes in groups such as franchises and other sales organisations about how location and territories. Competition nearby and size of territory can affect the profitability of businesses and the value of the contract.

Security over, or title to, assets

In supply agreements and contracts these clauses are essential to have drafted correctly. It is important that a business can recover the goods if they are not fully paid for. This and the Personal Property Security Act 2009 (PPSA) and registrations will ensure that if you supply goods that you can recover goods if the other party defaults on payment.

PPSR

It is important that the PPSA and registration process is clearly defined and interests are protected. The PPSA relates to all property other than real estate and the registration of interests is key to security of title over goods and assets.

READ MORE > on the PPSR

Limitations and exclusions of liability

Rights and Responsibilities

Every party should understand their rights and responsibilities and the commercial lawyer will have to understand the elements of the commercial transaction and ensure that the terms are correctly drafted to protect and facilitate the commercial agreement.

Resolution of disputes

How disputes are resolved is important to make sure the dispute resolution process is quick and efficient. Incorrectly drafted this can make it much more expensive and problematic to resolve a dispute.

Boilerplate Clauses

Boilerplate clauses in contracts typical types of clauses – general clauses that appear at the end of a contract that don’t form part of the substantive subject matter which explain how the contract will be performed.

It is important when drafting and reviewing contracts that these clauses are looked at carefully. They are routine and usually in fine print, but they have a great impact on how the transaction proceeds and how disputes are resolved.

Boilerplate clauses can cover such items as the following:

Applicable Law

Defining what law and jurisdiction is crucial and can make issuing proceedings and resolving disputes much easier if this is properly considered. This is a technical point but has a large bearing on how the contract is interpreted and enforced. This is of utmost importance when dealing with international companies and transactions.

Amendment

This is how the parties can make changes to the agreement or contract. It is simple, but once in effect can help or hinder the relationship between the parties.

Legal Costs

Clauses can be inserted to clarify who is paying for legal costs for production and signing of contracts and agreements. This is quite often in place in commercial leasing agreements.

“Act of God”

Clauses to deal with and protect parties in the events such as war, pandemic, floods, tornadoes and other circumstances beyond the control of the parties should be carefully considered. The phrasing of this should not reflect international counterparts such as “force Majeure” or the German “hohere Gewalt” as it’s applicable to Australian laws. Your contract lawyer must understand the distinctions and how these clauses apply.

Rights, Powers and Remedies

The rights, powers and remedies are to provide clarity about what power the parties have and how issues and problems are resolved. If these terms are clearly articulated in the contact, then there is more clarity about how they are resolved and what the remedies are.

Delivery of Documents

Service of documents is crucial element to most contracts. The method of service of documents is critical to ensure that documents are received in the correct time and manner and can be relied upon.

Warranties

These are promises or assurances that a party may make. It is important that these understood by the parties and the effect of the warranties is understood.

Definitions

Definitions clearly articulate what is meant by each term and are critical to have correct. When a dispute arises the definitions will be scrutinised by lawyers and barristers and will dictate how the contract is enforced.

These are just some boilerplate clauses. They may seem tedious, but once the contract is in play they come to life and must be applicable and provide protection and benefit the parties. A dispute is the ultimate stress test of a contract and having documents that are not properly considered and drafted will inevitably give parties more opportunity to avoid or terminate a contract.

How Can We Assist?

Our contract lawyers and our law firm handle a wide variety of commercial contracts and agreements both from drafting to litigation and disputes. Whether it is contracts for individuals, small businesses, or medium sized businesses we can assist.

We can provide contract advice or we can draft contracts for any type of business or personal relationship. We take instructions and make sure that we understand all the elements of the how the relationship will work. We draft the contract in consultation with you and negotiate with the other side so that your interests are protected. We also make sure that the contract fully reflects the rights and responsibilities of the parties in the personal or commercial agreement.

We are experienced in handling contract disputes and litigation. You benefit from this knowledge as we draft contracts and agreements to avoid common problems and issues. Our experience in looking for ways to help clients out of contracts and, in the alternative, how to enforce contracts means that we take better care when writing contracts for you.

We can assist with advice and preparation and negotiation of contracts for individuals, small and medium sized businesses.

To speak to one of our contract lawyers regarding call us on 1300 907 335 or complete an online enquiry form and we will get back to you shortly.

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