Start Ups: Commercial Contract Considerations
When forming your new business you will enter into commercial contracts on a day to day basis. This can be: when you fit out your new office, engage a service provider to provide you with your IT systems, when a user visits your website or ultimately, when a customer buys your goods and/or services. Whether you are purchasing, selling, distributing or licensing, you will need to ensure that you have the necessary contracts in place to ensure you are protected in all areas of your business. You may also need to have certain policies and procedures in place such as those relating to data protection as well as dealing with matters such as modern slavery and anti-bribery.
What you, as a business owner, must consider commercially
As a business owner, when entering into any commercial contracts, it is key that your contract sets out exactly what you intend it to do. This is a document you may ultimately rely on in the event something goes wrong, therefore you must make sure from the outset you have documented exactly what the parties have agreed commercially as well as key legal provisions and protections. When it comes to your commercial contracts, points to consider include, have you protected your intellectual property rights or, when you are being provided products and services, are you expecting to obtain any rights over the IP?
Secondly, how and where are the services to be provided? For example, are you expecting an onsite software engineer to install your new IT systems but your commercial contract stipulates a collection and self-installation process? Clarity is key throughout the process and you want to ensure that everything you require from a commercial perspective is accounted for in your commercial contract. If your contract involves the sale or purchase of goods, a point to consider is have you established when/ if ownership will pass, is it at the point the goods are delivered or when you receive them? Similarly, if the contract involves international supply of goods, consideration needs to be given as to who will bear the delivery costs as well as obtaining import and export clearances and licences.
Thirdly, on what terms will you pay/ be paid? Do you want payment from the outset, or are you expecting a trial period to take place ahead of any money changing hands? It is best to come to a commercial decision agreed between yourself and the other party. On the flip side of this, what happens if something goes wrong, who is liable and/ or how can you get your money back? Caps and limitations on liability are fundamental in any contract as a means of allocating risk and it is crucial to ensure that your liability is capped to a level you are comfortable with commercially.
There are many points to consider when entering into and/or drafting commercial contracts. If you require assistance or guidance please do get in contact with a member of our Commercial team who would be happy to discuss your requirements in more detail.
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.
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We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2020 by Legal 500 and Alistair McArthur is ranked in Chambers 2020.