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Key Contractual Clauses to Help Prevent Commercial Disputes

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Regardless of the size or industry of your business, a contract is a critical document you should prioritise when trading. There are certain clauses you can include in your contract to prevent commercial disputes from arising. Investing in a well-drafted contract could save you time and money and help maintain good customer relationships. This article will explore some of the key clauses in a contract to help prevent commercial disputes. 

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How Can Contracts Prevent Disputes?

A contract is a critical legal document for parties entering a business arrangement or project. You would negotiate and draft them specifically to help protect you from risk and to avoid disputes.

Below are some of the key clauses a contract can include to prevent disputes from arising. However, you should consider your specific commercial project and ensure your contract is fit for purpose. Many clauses could help prevent disputes, depending on the nature of the project.

Key Contractual Clauses to Prevent Disputes

Here are some examples of contractual clauses which can help to prevent disputes:

1. Clauses Specifying the Contract Deliverables and Timeframes

Lack of clarity is a key cause of disputes. To avoid a dispute arising based on a misunderstanding, your contract should clearly state what the supplier is providing and what standards the customer expects.

Specific provisions to include around contractual obligations are:

  • a full and accurate description of the products or services to be provided;
  • dates for the delivery of the products or services;
  • the standards to which the products or services will be delivered (including any specifications or requirements the customer has requested); and
  • any caveats that the customer should be aware of – for example, explaining that as a supplier, you cannot guarantee that delivery of products will arrive on a specific date.

Spelling out these terms in a contract will help the parties understand what is agreed, manage customer expectations, and help avoid misunderstandings that could escalate into disputes. This will also create certainty and lay out the contractual position. For example, suppose there are any questions from the customer over the contract deliverables or timeframes. In that case, a supplier can point out the relevant contract clauses and remind them of what has been agreed.

2. Payments Clause

Although it may sound obvious, payments are often a common cause of disputes, such as when a customer fails to pay their invoices on time.

Your contract should include a clear payment clause explaining points such as:

  • the price for the products or services;
  • the payment terms;
  • whether the price includes VAT or not;
  • whether interest will be payable for late payments;
  • if the customer has to pay a deposit;
  • if payments under the contract are non-refundable, particularly if pirates decide to end the contract early.

You can also include a specific clause setting out a procedure for resolving invoice disputes. In particular, you should clarify what to do if a customer has a problem with an invoice or your products or services. Setting out a clear procedure to quickly resolve issues could help save time and money and stop such problems from escalating into disputes. 

3. Dispute Resolution Clause

Unfortunately, problems do arise during contractual relationships. If you do not resolve those problems quickly, they can escalate into full disputes. To assist you, your contract can include a dispute resolution clause, offering a clear way to resolve problems that arise. 

A well-drafted dispute resolution clause often sets out an informal dispute resolution procedure, stipulating a process for parties to resolve the dispute. For instance, this clause can state how customers should discuss problems openly and resolve them through negotiations or meditation. The parties would need to follow the procedures set out in the dispute resolution clause. Hopefully, following the procedures in the clause will save time and money and prevent the parties from taking legal action. 

Having a dispute resolution clause can also help manage customer relationships by offering methods to resolve problems and, in some cases, may even help rescue business relationships.

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Key Takeaways

A contract is a vital document, and including certain important clauses could help prevent disputes from arising and help preserve business relationships. A well-drafted and tailored agreement can reduce the risk of disputes in various ways. For example, a contract can include a dispute resolution clause to resolve problems quickly and document clear contractual obligations to avoid misunderstandings between the parties.

If you need help with a commercial contract or legal advice, 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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