Benefits of having a contract in place
If you have a good relationship with your counterparty you may be comfortable entering into a relationship based on a “gentlemen’s” agreement or a more informal agreement than a written agreement. However, we would always recommend entering into a written agreement regardless of the strength of your business relationship.
Why we recommend entering into a contract?
The biggest benefit of a written contract is it (if well drafted) provides proof and certainty of what has been agreed between the parties. The terms agreed between the parties should clearly outline each parties obligations, rights and duties under the contract as this helps manage each party’s expectations under the contract and minimises the risk of any disputes or misunderstandings as to what was agreed.
If a written agreement is not in place then the parties may be left piecing together bits of correspondence or verbal communications as well as legally implied terms to ascertain the terms which govern the relationship. This approach lacks certainty and can result in costly and time consuming disputes between parties.
How do you know your liability under the contract?
Businesses need to understand what the liabilities and obligations of the business are under any new business arrangement. The best way to do this is to enter into a written contract with the counterparty. It is only then that a business will have a full understanding of the businesses’ exposure and risk under the contract. A written contract also provides you with the opportunity to add in additional protections which might be necessary to balance the risk under the arrangement and which wouldn’t apply if not specified in a written contract.
What happens if a dispute arises?
It is often only when something goes wrong that a party looks to rely on the contract, and without one, the terms of the arrangement can be extremely unclear. We have seen on many occasions that clients do not have a written agreement in place and then if something does go wrong the disputes are usually complicated by the fact that there is no written agreement which in turn may make them more costly and time consuming.
Relying on a “gentlemen’s” or informal agreement to avoid time and costs associated with drawing up a written contract could cost you considerably more in the future if a dispute arises.
How can we help?
For strategic advice on commercial contracts, please contact the commercial team at Herrington Carmichael LLP using the details provided below.
Please contact Mark Chapman on 01276 686 222 or Cesare McArdle on 0118 977 4045.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
Latest Articles & Legal Insights
Key Considerations When Selling a UK Financial Services Business
The sale of a financial services business needs to adopt an appropriate structure with expert legal and tax advice.
Missing Shareholder – what do we do?
Have the gears of your company ground to a halt as a result of a missing shareholder throwing a spanner in the works?
Commercial contracts in 2024 and beyond Q&A
Q&A on commercial contracts in 2022 and beyond: businesses are looking further than their ESG initiatives to achieve net zero.
CAP and BCAP update: new rules on alcohol alternatives
New rules have been developed to ensure responsible advertising of alcohol alternatives and to protect consumers from potential harm.
Threshold updates for High Net Worth and Sophisticated Investors
New thresholds for categorising investors as high net worth or sophisticated will come into force on 31 January 2024.
Navigating FCA Regulatory Business Plans
Compliance with regulatory standards is a key legal requirement for financial services businesses.
Sign up
Enter your email address for legal updates on Corporate and Commercial law.
Top Legal Insights
Contract Law
Material Breach of Contract
What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?
Property Law
Commercial Lease: The Financial impact on Landlord and Tenant
Coronavirus (COVID-19) and the restrictions now in place to control its spread, are having a significant effect on many business sectors.
Divorce and Family Law
Divorce in Lockdown: Can I get some discreet legal advice?
We have spoken to clients who are unfortunately experiencing some family issues, and would like to obtain expert legal advice, yet don’t know how...
Land & Property Dispute
Restrictive Covenants – The Price of Modification
Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?
Award winning legal advice
Herrington Carmichael offers legal advice to UK and International businesses as well as individuals and families. Rated as a ‘Leading Firm 2024’ by the legal directory Legal 500 and listed in The Times ‘Best Law Firms 2023 & 2024’. Herrington Carmichael has offices in London, Farnborough, Reading, and Ascot.
London
60 St Martins Lane, Covent Garden, London, WC2N 4JS
Camberley
Building 9, Riverside Way, Watchmoor Park, Camberley, Surrey. GU15 3YL.
Wokingham
Opening Soon
info@herrington-carmichael.com
© 2020 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.
Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority.
Privacy | Terms and Conditions | Cookies | Client Feedback