Four Steps to Drafting a Business Contract in England

As a business owner, you may often successfully negotiate agreements with suppliers or customers but then struggle to draft a suitable contract. For instance, your business could agree on a provisional arrangement to purchase services from another company. Still, it may come unstuck when negotiating the written details regarding delivery and payment. This article will explore four practical steps to help your business achieve a legally binding agreement. For the purposes of this article, we will define a commercial contract as one with another company (and exclude employment contracts).  

1. Agree on the Purpose

There is no point in starting a draft contract if the parties cannot agree on the goods or services it should cover and the relevant payment details. Therefore, the discussion should focus on this before committing to any terms on paper.

This step will be relatively easy for deals with a simple purpose, such as purchasing goods. However, in other cases, there may be multiple reasons for entering into the contractual arrangement. Thus, this step will be more challenging. If the parties cannot agree on wording that sufficiently covers the goods or services at the heart of the arrangement, then a contract is unlikely to proceed past the draft stage.  

2. Record Verbal Agreements

You should record everything the parties mutually agree upon within discussions in a contract. Although English common law recognises verbal agreements, a written agreement is preferable, especially where the contract pertains to high-value transactions.  

Additionally, agreeing to everything in writing avoids any future debate regarding the terms of the agreement. Furthermore, each party can refer to the contract to double-check their obligations and avoid misunderstandings.

3. Finetune the Terms

Draft commercial contracts are often very different to the final contract. Often, it can take a negotiation period between your business and the other company to ensure you are both happy with the terms. Furthermore, you must ensure the draft agreement does not contain unfair contract terms.

During this stage, both parties will consider fair and reasonable wording. It is an exercise in compromise. For example, one party may approve a term on the condition the other party reciprocates on a different clause. This is where the attitude and negotiating style of the parties can make a difference.

4. Consider Legal Advice Before Signing

One of the most critical issues is whether or not a clause in a commercial contract is legally enforceable. This can be complex and require expert knowledge of contract law and relevant cases. So naturally, this is where engaging a contract lawyer is beneficial. 

Key Takeaways

The length of time it takes to commit a business deal to paper depends on the complexity of the deal in question. Overall, the willingness of the parties to compromise and be firm but fair during negotiations can help achieve a binding written agreement.

Your business will find that some deals run very smoothly, whilst others may founder on the rocks for a while. It may be beneficial to engage a lawyer to assist where a deal appears complex. Often, a lawyer can help advise on which points to be flexible on and which clauses to stand firm on. Additionally, a lawyer can negotiate on your behalf and be your contact with the other party. Most lawyers are good at navigating tense situations and avoiding the use of overly emotive language.

If you need help with drafting business contracts, 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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