Common Mistakes When Entering Into a Commercial Contract in England

A commercial contract is a legal document that will form the foundations of your business. Therefore, you must draft and review important terms before signing an agreement. If you fail to do this, you will likely face complications with running your business. This article will explore some common commercial contract mistakes that companies make, so your business can avoid them. 

In this article, we will discuss common mistakes that may occur in commercial agreements between your organisation and another business. Further, we will focus on business contracts and ignore employment contracts and settlement agreements.

What is a Commercial Contract?

Essentially, a contract is a legally binding agreement between two or more parties. In a commercial sense, business contracts typically occur between businesses and individuals regarding how a business will run. For instance, a commercial contract may cover an agreement regarding the transporting of goods. In most cases, a commercial contract will be in writing, however, this is not always the case. Sometimes, these contracts can be verbal. Some common mistakes are outlined below.

1. Naming the Wrong Party

This sounds simple, but using the correct name for a business can sometimes be tricky.

For instance, consider your business is providing goods for a supermarket chain (which we will call ‘Big Stuff’). You may draft a contract to record the deal and describe them as ‘Big Stuff.’ Although this may be their brand name, they may have different names for other businesses within this chain. For example, their food stores may be named ‘Big Food Stuff Limited,’ their petrol stations ‘Big Petrol Stuff Limited’ and so on.  

Therefore, if you use ‘Big Stuff’ in your contract and not their legal name (leaving out the ‘Limited’ or ‘Ltd’ description), you may present them with a potential loophole to escape the deal down the line.

2. Using Unenforceable or Illegal Wording

It is not mandatory to use a lawyer to draft contracts. However, doing this will decrease your risk of using unenforceable or illegal wording.

Your company will likely not wish to agree to an unenforceable clause. This may be the case, particularly if the other business has the benefit of legal advice and knows you cannot safely use it against them in the future. Further, most contracts involve a lot of ‘give and take’ between the parties. As a result, your organisation may risk providing the other party with an advantageous clause because they supply you with one (of limited value).

3. Agreeing to Unreasonable Wording

While many business owners feel confident negotiating commercial deals, most are not entirely familiar with legal contract drafting. Unfortunately, there are numerous potential consequences to attempting a complex written agreement without legal assistance.

For instance, your business may be at risk of agreeing to unreasonable wording that may not be typical for a contract of that nature. Alternatively, specific wording may result in an agreement that creates an unbalance between the parties. Unfortunately, legal contracts tend to contain ‘legalese’. Therefore, understanding the true impact of particular wording can often be tricky. 

4. Grammatical Errors

Finally, simple grammatical errors can significantly impact a commercial deal. For instance, potential mistakes could include:

• failing to complete blank spaces;
• leaving square brackets or drafting notes in a contract; or
• failing to delete old parts of the agreement.

For example, consider that your organisation seeks to complete a purchase order with another business but leaves the gap meant to describe the relevant products blank. This error could render the contract useless in practice. Moreover, even if you can save the contract, such a mistake could still lead to uncertainty.

Can a Written Contract Survive a Mistake?

Often, the answer is yes. 

English law tends to hold the parties to a contract to the wording, even when language is slightly inaccurate. So, if the intention of the contracting parties is clear upon signing the document, this will help a court interpret it accordingly.

For example, let us say that a commercial contract between your company and another business states that they will pay you ‘7000 punds per month’. Ultimately, this contract should say ‘7000 pounds per month’ as pounds are our standard currency. In this way, your business could insist on proper payment of funds. Furthermore, you can enforce the contract in court if the other party tries to use the minor error to escape the contract terms.

Key Takeaways

Not all commercial contract mistakes will result in the document being void. However, some will complicate your company’s life due to the increased risk of uncertainty or dispute. In addition, some mistakes are less likely to occur if you consult a lawyer first. Regardless, it would help to make a good habit of carefully reviewing all wording before signing any commercial contract.

If you need help with a commercial agreement, our experienced commercial 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.

Frequently Asked Questions