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Using well-written and robust legal agreements is vital for a business supplier, whether you are the provider of goods or services. However, commercial contracts can involve several potential pitfalls, particularly from poorly drafted terms. Poorly drafted commercial agreements can lead to difficulties ranging from misinterpretations to disputes and unhappy clients. This article will consider some risks that can arise when adopting poorly drafted contracts as a business supplier.
Why Are Legal Agreements Crucial for Business Suppliers?
A legal agreement is a vital tool for your trading protection. It lays out the terms for how parties will do business, so you have evidence of your obligations and rights.
Robust contract management is essential for any business selling products or services. It can, for instance, offer critical protection if something goes wrong. A legal agreement can also significantly limit your liability to a customer if they bring a legal claim against you.
Without a robust contract, you may expose your business to several risks. However, a lot of companies fail to invest in well-drafted contracts. For instance, a business owner may put together a poorly drafted contract themselves to save costs without legal knowledge of what the contract should include or how to draft it. Or, they may use an online template document that is not tailored to their business and does not make sense because it does not cover the specific services the company delivers. This approach comes with significant risks, as explored further below.
What Are the Risks of Poorly Drafted Legal Agreements?
Using poorly drafted legal agreements could create numerous difficulties for your business. Not only would several legal risks arise, but commercial risks would, too.
We explore these risks below.
1. Legal Risks
Key legal risks associated with poorly drafted legal agreements include the following:
- poorly drafted legal agreements can lead to accidental breaches by suppliers. Poorly drafted terms make it easier for your business to overlook or misunderstand obligations, potentially resulting in breaches. For example, if what you deliver does not match customer expectations due to ambiguous contract terms, it could trigger customer complaints against your business;
- poorly drafted legal agreements can foster uncertainty when delivering products or services, encouraging misunderstandings and customer disputes. Uncertainty in legal agreements may distort parties’ understanding of obligations, risking business relationships. This can happen if a contract includes poorly drafted and unclear terms regarding critical issues such as deliverables, timelines, and payment terms. If the parties disagree on what the contract requires, disputes can arise;
- when commercial parties disagree on the meaning of poorly drafted legal agreements, disputes over interpretation can end in court. For example, if a customer believes specific poorly drafted terms in your contract are unfair and unenforceable. A judge might deem vague terms in your agreements unenforceable, exposing your businesses to severe legal risks. For instance, an unenforceable liability limitation clause could lead to substantial legal liabilities for your business.
Litigation is also expensive, time-consuming, and a massive burden for businesses. To avoid costly litigation, it is essential to draft watertight and clear contractual obligations and contractual language from the outset to prevent disputes from escalating to court action.
2. Commercial Risks
In addition to the legal risks highlighted above, your business could face several commercial risks because of poorly drafted legal agreements.
For instance:
- poorly drafted contracts will inevitably lead to customer questions and significant time and resource costs. For instance, protracted negotiations and legal fees could arise if a customer wants to change the poorly drafted terms;
- new potential customers may not wish to work with you if they believe your agreements are unprofessional and present significant risks for them. Such customers could argue your terms do not reflect the standard they would expect from a reputable supplier;
- poorly drafted terms could damage your reputation, as savvy target customers could worry about working with a business without professional and robust commercial agreements; and
- your business could also lose its competitive advantage if competitor suppliers offer professionally drafted and clear contracts to new customers.
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How Can Working With A Solicitor Help Avoid These Risks?
Given the risks above, investing in clear and well-drafted legal agreements for your business is vital. This approach protects your business from legal risk and expedites customer agreements quicker, with fewer questions and negotiation time.
Download this free Commercial Contracts Checklist to ensure your contracts will meet your business’ needs.
Contract drafting can be a complicated exercise. If you require help drafting legal agreements, you can work with a commercial solicitor to provide legal advice and drafting expertise. A solicitor can advise which types of agreements your business needs to protect itself. A solicitor can prepare bespoke and well-drafted legal contracts to protect your business from risk and give you comfort when trading. Overall, investing in well-drafted contracts is worth it to prevent the risks that could otherwise arise if your agreements are poorly drafted.
Key Takeaways
Poorly drafted commercial agreements can carry significant risks. Your business could struggle with various negative implications because of poorly drafted legal and commercial agreements. Clarity is critical in such contracts, as poorly drafted legal terms can lead to legal disputes, concern customers, and loss of business opportunities. Investing in well-drafted legal agreements is essential for mitigating such legal and commercial risks. If you require support, you can work with a commercial solicitor to prepare robust and well-written legal contracts for your business.
If you need help drafting a robust legal agreement, you can contact LegalVision’s experienced contract lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
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