Contracts are a big part of running a business. Whether you are hiring someone, buying goods, or working with another business, a contract helps make sure everyone knows what they are responsible for [or at least they should].
To get a better idea of how contract law works and how it can help protect your business, we spoke to the team at Our Lawyers, an amazing law firm in the Southern Highlands.
They have been helping clients in Bowral, Mittagong and across the Highlands for over 20 years. So it is safe to say they know their stuff.
What Is A Contract And Why It Matters
A contract is a legally binding agreement between two or more parties.
In your business, contracts can define expectations, allocate risks, and provide an avenue if things go wrong.
They include everything from your supplier agreements, client services, terms and conditions, to your leases and employment contracts.
Without clear contracts, misunderstandings can lead to legal disputes. A well-drafted contract helps avoid confusion and reduces the chance of conflict.
Essentials Of A Contract
These are a few main points to a contract:
- Offer: Where one person makes a proposal to another.
- Acceptance: the other party says “yes” to that offer.
- Consideration: Each party gives something to the other [e.g. providing a service or paying for a service].
- Intent: Both parties intend to create a legal binding agreement.
- Capacity: the parties are legally able to enter the agreement and/or are mentally competent to do so.
Written vs. Verbal Agreements
Most people have heard of a “handshake deal”, so it’s no surprise that not all contracts have to be written down. Verbal agreements can still count, but they’re much harder to prove if things go wrong.
Chasing one up can take a lot of time, money, and energy. People remember things differently, details get missed, and if there’s a dispute, it often comes down to your word against theirs.
Written contracts are always the safer option. This is because they:
- Provide clear evidence of what was agreed.
- Clarify roles, responsibilities, and expectations.
- Help prevent misunderstandings.
In some cases [e.g. such as retail leases or certain business sales] written contracts are legally required. Because of that reliance on written contracts, it is important that you negotiate them before signing on the dotted line.
Key Terms For Your Contracts
Here are a few clauses that you should have in your contracts, at a minimum
- Payment Terms: Describe when, how, and how much payment is to be made.
- Termination: Set out how the Contract ends, including by choice or due to a default.
- Dispute Resolution: Set out a process on how a dispute will be addressed before it goes to court (e.g. mediation or arbitration).
- Confidentiality and Intellectual Property: Ensure to protect your confidentiality and your Intellectual property.
- Warranties and Liabilities: Clarify the promises being made, and try to reduce your risk exposure for matters outside your control.
Common Pitfalls To Avoid
We understand that adding contract drafting to your list of tasks may not be front of mind. For many, there are common contract traps that come up, that you should watch for:
- Using generic templates without tailoring them to your business needs, or compiling a number of different templates without properly drafting it for you.
- Failing to read the fine print [small clauses can have big consequences].
- Not defining key terms, which can lead to ambiguity.
- Relying on verbal promises, which may not be enforceable.
- Skipping legal advice, even for “small” agreements.
When in doubt, consult a lawyer. A small investment in legal advice upfront can prevent costly disputes down the line.
Protect Your Business
Contracts aren’t just paperwork. They protect your business, lay out responsibilities, and help build strong, reliable working relationships. Knowing the basics of contract law can give small business owners more confidence when making deals and help avoid issues down the track.
If you’re entering into an agreement that matters to your business, it’s worth getting proper legal advice. A commercial lawyer can make sure your contracts are working in your favour and help you take the next step with confidence.
Clarissa Follan is part of the team at Our Lawyers, joining in March 2023. She’s a commercial and dispute resolution lawyer who’s all about supporting local businesses.
Clarissa can guide you through the legal side of things and make sure your contracts and agreements are set up to support your business as it grows.
Whether it’s a lease, an employee agreement, or updating your terms and conditions, Our Lawyers can help you feel prepared and protected.
You can get in touch with the team at Our Lawyers through their website, drop by their Mittagong office, or give them a call on (02) 4872 4004. They’re nationally recognised and right here to help the Highlands community.
A Leading Law Firm in the Southern Highlands
At Our Lawyers, our experienced legal team offers a friendly and personalised service to all of our clients, with every effort taken to ensure that we deliver results in all areas of the law. We understand the importance of individual attention, and so we are here to work with you every step of the way to ensure that your legal requirements are met. We strive to provide an approachable, client-centered, and successful service so that you can feel confident that you are receiving the best possible legal advice.
Our expertise covers a wide range of areas, including but not limited to family law, conveyancing, commercial law, wills and estates, and property law.
Our team of experienced lawyers will guide you through the legal process, ensuring you have the information necessary to make informed decisions. Our Lawyers have provided quality legal services to clients in the Southern Highlands for over 20 years. We are approachable, modern, and efficient.
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