Negotiating a Commercial Contract to Avoid Disputes

One of the most common reasons for a business dispute involves a badly negotiated commercial contract. Marcus Croskell, Suffolk based business lawyer, has many years’ experience in helping companies to negotiate successful business contracts, as well as representing firms when disputes arise. Here, Marcus outlines 6 key steps you can take to ensure your commercial contracts are watertight from the start, minimising the chances of a lengthy or costly dispute.

Prepare in Advance

The greater the value of the contract, the more effort and time you should put in to thinking about the fine detail of what you need from the contract, before you enter into formal negotiations. As well as the “headline” terms – such as how much you want to pay or be paid and timescales for the work – you need to think more widely about issues such as communications, milestones and sign-off points for interim work, type and method of payment, any post-delivery maintenance issues, what circumstances will allow one or other of you to terminate the contract...and much, much more.

Without this type of preparation it’s all too easy to be bounced into signing a contract prematurely, only to find later on that you are bound by a condition you didn’t fully understand, or that a particular set of circumstances isn’t covered by the contract at all, leaving room for a dispute.

Getting expert help from an experienced Suffolk business lawyer, particularly if there is time pressure to agree a contract, will save time and money in the long term by ensuring the contract doesn’t have any obvious gaps or ambiguities which could lead to trouble later on.

Ensure Clarity

All too often, the majority of effort that goes into negotiating a commercial contract revolves around getting the best financial deal possible. But a business contract should provide for much more than simply setting out how much will be paid for goods and services. Its primary purpose should be to provide both parties with full clarity about the working arrangement between both sides, while the work is carried out and possibly for some time afterwards.

Talking about each term of a contract at the start of a commercial relationship is a great way to get each party to discuss what they require from the relationship. As the relationship develops, as long as both parties agree, there’s nothing to stop you from changing the terms of the contract.

Clearly define exactly what is being paid for, how much is expected for payment and when payment is due. If the terms are crystal clear right from the start, it will make things easier to establish what is expected to happen, and who is in the wrong if the relationship breaks down.

Protect Your IP

If the contract involves the provision of any element of design or text (e.g. graphics, copy, product design etc) make sure to specify how the rights are to be assigned on completion of the work. For instance, a photographer may retain copyright of their work unless it is specifically assigned to the client as part of the contract.

If the work is of a technical nature that could give rise to a patentable innovation (e.g. software or product development) the contract should specify who should have the rights to that patent – the supplier or the client. If the supplier intends to use its own previously patented technology as part of the end product, is some kind of licensing agreement required? This is especially important to pin down if the client intends to then re-use or distribute material or products which contain the patented technology.

Identify Risks and Escape Routes

If you are entering into a long-term contract, or a contract where you perceive there to be risks outside your control (e.g. delivery depends on the actions of other 3rd parties, or progress could be hampered by weather conditions) it is important to include some sort of get-out clause. This can be through the inclusion of ‘change control’ provisions (so you can change the terms of the contract if the initial expectations can’t be met) or though a ‘termination for convenience’ provision (so you can end the contract early if necessary).

Iterating the risks and defining your right to terminate or renegotiate terms in these circumstances, helps to protect you from being sued for breach of contract if you are unable deliver through no fault of your own.

Dispute Resolution

All commercial contracts should contain provisions for dispute resolution. These should clearly explain what happens if either party wants to make a claim under the contract. If the contract is between two parties from different countries, these provisions could be as simple as confirming which country’s laws apply.

At the beginning of most contractual relationships, optimism is high, and no one wants to think about what could go wrong further down the line. However, looking to the future will ensure that there are no unwanted surprises should the relationship break down and both parties can’t resolve an issue amicably.

Involve Your Lawyer at an Early Stage

The best way to avoid a business dispute is to involve a specialist commercial lawyer as early as possible in the negotiations. For complex and/or high value contracts it can be invaluable to invite your lawyer to initial meetings, so that they have full information about the issues involved.

Marcus Croskell is a leading business lawyer who offers valuable commercial contract advice to firms of all sizes in Suffolk, East Anglia and beyond. He can provide clear and accurate recording of the commercial terms of a deal and assists at every stage of a commercial contract negotiation. Marcus can also point out any issues with a contract, for example, proposed terms that do not comply with company policy or are illegal.

If you are at any stage of a commercial contract negotiation or require help to resolve a business dispute in Suffolk, speak to Marcus Croskell today on 0843 886 2603 or contact him here.