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What you need to know about business contracts

Even if you don’t think your business uses or needs contracts to trade, then there is something very important you need at least to know – a contract exists where any trading takes place, whether there is something on paper or not. A customer buying even the smallest item from a shop is entering into a contract with the seller. A contract exists where an item or service is exchanged between two parties in mutual agreement.

Contracts should be a major concern of every business owner. Not that there is anything to worry too much about but you do need to be aware of your rights and responsibilities when entering into a contract with your customers, your employees, and your suppliers.

Not every deal has to be done in writing, but if the value of the deal is high, or over a long-term, such as for a lease on your premises, then it must be in writing. In this instance, it’s probably wise to get a lawyer such as Yashmin Mistry of JPC Law or SA Law to check the contract for you.  Initial consultations with lawyers are generally free of charge, and you only pay for the work they carry out later. For deals with a lot of money involved, what may feel like an exorbitant expense in the short-term could save you expensive legal action in the future.

For consumer servicers, there are a number of statutory rights which all contracts contain and which cannot be over-ridden. These are…

  • Goods must be available to be sold by the seller, must match their product descriptions, be of satisfactory quality, be fit for purpose, and match any sample provided.
  • Services must be performed with reasonable care and skill, must be done in a reasonable time, and at a reasonable price.

If any of these rights are not fulfilled, the customer is entitled to a refund.

For companies that make bespoke goods and provide services to other businesses, it gets a bit more involved. You should draw up a set of terms and conditions of trading stating your terms regarding manufacturing tolerances, delivery times, and other industry issues. A business lawyer can do these for you, or your trade association will have a standard set that you can adapt to your business. These terms and conditions have to be freely available to anyone thinking of trading with you before they trade with you. It’s no good having them on an invoice because the deal has already been done. You need to think about including your terms and conditions at the estimate and negotiation stage. By drawing up terms and conditions you are putting in writing the trading expectations which gives the other party chance to query anything upfront. This protects you from legal action as much as it does them.

Contracts do not have to be in writing so bear this in mind if your company does face-to-face selling. Inaccurate claims about a product or service made verbally by the seller are a breach of the business contract which invalidates the trade. It could also lead to legal action. You need to make any sales staff aware of this and make sure they sell your products or services accurately and fairly.

Employment contracts are along the same lines. There is a belief that employment contracts need to be in writing, but this is not true. While it’s advisable to put any long-term trading relationship in writing, you should also bear in mind that anything you say regarding pay and conditions forms part of the contract, so stick to discussing contractual terms with your employees during formal meetings, where any changes can be put in writing. Again, a business lawyer should be able to help you with this.

What you need to know about business contracts for your specific business will vary depending on what you do, but the most important thing you need to know is that a written contract does not need to exist for a contract to exist. You need to get help from your trade association, local business advisors, and your lawyer to make sure you understand what your business contracts involve, and to give yourself protection from the fallout created by contract breaches.

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