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Contracts are the lifeblood of businesses, setting out exactly how they interact with suppliers, employees, customers, agents and many others. It is therefore vitally important to ensure that these contracts are drafted correctly and are fit for the job in hand. Here are some of the most common mistakes that we come across when reviewing contracts and how to avoid them.

The terms aren’t correct

Whilst you may think a small mistake may not have a material impact, even a small typo can lead to large issues (just imagine agreeing to pay a 20% commission to an agent rather than a 2% commission). Taking the time to ensure that the contract is correctly drafted, is free of mistakes and accurately reflects exactly what has been agreed between the parties will help avoid arguments or embarrassing situations where you have to ask to correct the contract.

The contract needs to be tailored

Each business is different, and you need to make sure that this is reflected in your contracts. Do not rely on your standard terms where they do not fit the situation in hand. If in doubt, seek legal advice.

Key terms are missing

Some businesses are afraid to include terms that appear too draconian. They want to assume the best in the other party, and avoid assuming the worst in their customer or a supplier when first entering into a business relationship with them. You can never predict the future however and having terms that protect you should the relationship break down is vitally important, even if you never have to rely on them.

It is also important to ensure that you iron out as much of the detail as possible before signing a contract. If a contract only sets out the bare bones of the relationship because the finer details are yet to be agreed upon you are leaving yourself vulnerable if these finer details can never be agreed upon.

They haven’t been written down

Contracts can be entered into verbally. But even if such an agreement is binding, it will always be your word against theirs when it comes to what was agreed. If the other party denies or conveniently forgets what they promised, you will struggle to enforce a promise said out loud if you cannot provide evidence of the conversation. If something is important, get it in writing.

The contract hasn’t been updated

Relationships often change over time, and the law and industry practices are forever being updated so take the time to review your contracts regularly. Replace or revise them (in writing!) if they are no longer fit for purpose.

The contract isn’t binding

Contracts are only binding if they are entered into correctly. You cannot for example rely on your standard terms of business if your customer has never been provided with a copy of them. Make sure that you are following the terms of the agreement as well – some contracts state that the contract will only become binding if certain conditions apply.

If you are looking to carry out a contract audit or have any questions regarding your commercial agreements then please contact one of our Commercial Contracts team today.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.