1. GET IT IN WRITING
Whilst a verbal agreement can be enforceable, it is much more difficult to prove. A business contract should always be in writing and outline each party’s rights and obligations in the event that there may be some disagreement or confusion down the line.
2. AVOID AMBIGUITY
One of the most common problems that arises in contractual disputes is a disagreement over the interpretation of a particular term or terms of the contract. Try to avoid using terms that could be open to different interpretations. Use a glossary to define any terms that you feel might be interpreted in a number of ways to ensure the meaning of them, in your particular contract, is clear.
3. KEEP IT SIMPLE
Avoid using overly complicated language. It is best to use ordinary words and avoid legal jargon if at all possible. You should make it possible for all parties to understand the nature and effect of the contract.
4. SPELL IT OUT
Ensure that the contract sets out the rights and obligations of the parties and don’t leave anything out. Consider all “what ifs” when thinking about what to include.
5. BE OPEN AND FAIR
Avoid using terms which may be construed as being unfair or hiding important terms away in small print. If there is anything that has a significant impact on a party, it should be highlighted as being important in the contract. An unfair term could mean that the contract is unenforceable as a whole.
6. PAYMENT OBLIGATIONS
If the contract involves money changing hands, specify who should pay whom, when the payments ought to be made and how the payments ought to be made. This can be important if you are trying to enforce a debt that is owed. For example if you have not specified a time scale for payment, it is going to be very difficult to persuade a Court to issue a judgment against the debtor.
7. TERMINATION OF THE CONTRACT
The contract should clearly set out the circumstances in which a party is able to terminate it. If you don’t list circumstances in which the contract can be terminated and you try to end the relationship, you may be found to be in breach of contract and penalised as a result.
8. DISPUTE RESOLUTION
It is important to include terms to deal with how to resolve a dispute should it arise. It is sensible to utilise alternative dispute resolution (ADR) methods, such as mediation, which can save time and money rather than having to resolve the dispute through the Courts.
9. WHAT HAPPENS IF THE CONTRACT IS BREACHED AND ADR DOES NOT WORK?
If there has been a breach of contract which has resulted in loss or damage to one of the parties, that party can decide to issue a claim at Court. If the resulting loss is less than £10,000.00 then the claim would be allocated to the Small Claims Track which is intended to be more “user friendly” for litigants in person. Guidance as to how to issue a Small Claim can be found on the government website – https://www.gov.uk/ make-court-claim-for-money/overview . If the dispute is over £10,000.00 it would be allocated to the Fast Track, and if it is over £25,000.00 to the Multi Track, where lawyers are more usually involved. If you happen to have a claim issued against you, do not ignore it otherwise you could end up with a County Court Judgment against you which could affect your credit rating. It is important to comply with the Court deadlines for responding to the claim. If you are not comfortable with the litigation process, it is best to seek legal advice.
10. WHAT REMEDIES ARE AVAILABLE IN THE EVENT OF A BREACH OF CONTRACT
Most usually, an award for damages in the form of compensation would be made by the Court. This can be enforced by High Court Enforcement Officers in the event that the debtor fails to make any payments. Less commonly the Court can order a party to perform their contractual obligations if an award for compensation is not sufficient to “put things right”.
This Fact Sheet is for information only and is not intended to be a substitute for legal advice.
For more information on contracts and the law please contact:
Julia Fenton – Solicitor
033 3344 9600