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A business contract is crucial to protect any business, regardless of size, industry or how long it has been trading. However, to fully protect your business, you should consider having a bespoke contract tailored to your business activities. This article will explore some of the key ways in which a bespoke contract can protect you.
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Why is a Bespoke Contract Important?
A business contract is a commercial agreement that records the terms under which parties will do business. As a trading business, a robust contract to govern the sale of your products or services should be a number one priority. A business contract aims to protect a business when things go wrong.
However, every business is unique and will face different legal risks. Therefore, your business should carefully draft your commercial contracts to cover your specific products and services and the potential issues you could meet.
Some businesses may look to cut corners, for example, by:
- drafting a contract themselves. This is a high risk, as a business owner will likely lack the expert knowledge to properly draft a contract and miss essential provisions; or
- copying another business contract. This is high risk, as it can be copyright infringement.
Generic template contracts also come with risk. Often, they will be unsuitable and not specific enough to cover all risk situations a business may face.
Working With a Lawyer to Draft a Business Contract
Working with an experienced contracts lawyer can help your business identify the risks it faces and draft an appropriate, bespoke contract to protect it in the long term. Lawyers will also have knowledge of relevant laws applicable to your business. They will be able to help draft bespoke legal documents that comply with such laws.
For example, a lawyer can:
- identify legal risks you may not have thought about, give you legal advice on them and cover them in your contract;
- draft important clauses to protect your business when trading, such as ‘limitation of liability’ clause;
- help draft your contract to ensure it is enforceable;
- advise you on how the contract should be signed so that it is legally binding;
- include provisions to prevent disputes from arising; and
- help you negotiate a bespoke contract with a counterparty to ensure your business is protected.
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How a Bespoke Contract Can Protect Your Business
There are a variety of ways in which a bespoke contract can protect you. We explore these below.
Reducing and Limiting Risk
There are various ways a bespoke contract can protect your business from risk.
A bespoke contract can include niche provisions and disclaimers to give you comfort that you have some legal protection to help in various scenarios particular to your business. For example, you may need to provide specific caveats about your business or rules for the customer to follow to allow you to deliver your services.
Clearly Defining Your Contractual Obligations
Investing in a bespoke contract gives you peace of mind, knowing it thoroughly outlines the whole commercial relationship. A well-drafted contract will have clear contractual obligations and this has the effect of avoiding mismatched expectations from the other party. Further, this can reduce the chance of disputes arising, which can be a commercial, reputation and financial headache.
Your contract should include bespoke terms around the following:
- payment terms – always state when you will pay the other party or when the other party must pay you. Payment terms are commercial terms for you to decide upon as a business and are not a ‘one size fits all approach’;
- ways to end your agreement – you will want robust terms allowing you to terminate in various circumstances (for example, if the other party commits a ‘material breach’ of the contract); and
- your liability if you fail to deliver to the customer what you promised – you should carefully draft a limitation of liability clause to cover your specific business and the potential liabilities that may arise.
The terms in your contract may also differ from customer to customer and business to business, depending on the size or value of a project.
Complying With Your Legal Obligations
Certain business contracts need to have specific, mandatory terms in them to comply with legal requirements.
For example, UK data protection laws require mandatory ‘data processing terms’ in contracts where a data controller uses a data processor. So, if your business contract involves processing (dealing with) personal data for and on behalf of a customer, you are likely to need several mandatory data protection law clauses in your contract.
Your data processing terms must be bespoke and tailored to set out exactly what personal information you will process on behalf of the customer, how you will use it, who you will share it with and when it will be deleted. You will need to carefully consider these provisions and tailor them for each contract you enter into.
Ultimately, it is vital that businesses comply with all legal obligations applicable to them. Having a bespoke contract will give you the opportunity to consider which laws apply to your contract and make sure your contract is tailored to help evidence compliance with such laws.
Failing to meet the necessary requirements in business contracts can lead to various problems, such as regulatory enforcement action against a business or customer complaints.
Key Takeaways
A business contract is a crucial document to protect your business. All businesses should have a robust contract that is tailored and specific to their business. A bespoke contract is important to protect your business from potential legal risks. You can work with a commercial lawyer experienced in document drafting who can add value by preparing a bespoke contract to protect your business in the long term.
If you need help with a bespoke business contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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