UK: How To Get Commercial Contracts Right From The Start

Last Updated: 23 September 2019
Article by Declan Goodwin and Megan James

Your commercial contracts are a vital part of your business. They ensure that your everyday trading runs smoothly, efficiently, and on terms that you understand.

English courts can rectify a contract if there is a mistake in it which cuts across the intention of the parties, nevertheless it is important to get your contracts right from the outset.

In this article we consider why businesses should have robust and compliant commercial contracts in place, the importance of reviewing them on regular basis and circumstances in which your contracts could be rectified by the court.

Why should you have commercial contracts in place?

A commercial contract regulates the relationship between two parties, usually two businesses.

Organisations benefit from having robust and compliant commercial contracts and policies in place for the following reasons:

  • Compliance – the law is ever-changing and so are the requirements for companies to comply with various regulations and legislation, some which can be very costly and impose life changing sanctions.
  • Risk – the risk of litigation or fallout from non-compliance will be decreased. Having standard terms and conditions will also reduce your risk of liability when things go wrong or ease frustration occurring from dealing with suppliers and customers.
  • Efficiency – robust and up-to-date contracts will make contracting easy and efficient with both suppliers and customers.
  • Reputation – in the business world, reputation is everything. Having effective policies and contracts give your company the accreditation it deserves – professional, current and knowledgeable.

What do you need to do to get your contracts right the first time?

Whether your business is in its early stages or well established in its field, commercial contracts are essential to the success of the company.

When looking to make a business contract with another business, we would recommend you to consider the following:

  • What is the commercial agreement? – this sounds obvious, but it is essential to have a clear commercial deal between both parties before contracting. It can make the negotiation and drafting processes long and drawn out if elements of the commercial terms are misunderstood or disputed.
  • The commercial and legal risks contracting with the selected third party could bring to the company – is the third party a well-established business or is there potential for your reputation to be compromised? This is just one example of commercial risks which can be dealt with in the terms of the commercial contract. If you can completely understand the risks a commercial contract can bring to your business, then these can be broached in the drafting.

How can you ensure your contracts are up-to-date?

Contracts, policies and procedures need to be regularly reviewed and updated to stay up-to-date with common practice and legislation.

Being in touch with changes in your market area will give you the edge and forward awareness of legal updates which may impact your contracts. Once you have identified the affected contracts, seeking legal advice and exploring best practice to see what is needed to stay compliant with new laws.

Rectifying contracts by the court - legal update

The courts' approach to rectification has historically been uncertain following a number of different approaches.  But thanks to the Court of Appeal in FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd1, there may finally be a clear way forward.

Where are we now after the FSHC Group Holdings Ltd case? The Court of Appeal in the UK has clarified the relevant test and has broken the test down to two distinct examples:

  1. If the parties have entered into a prior agreement, and subsequently executed a contract which contains different terms – the courts will apply the objective standard to its rectification, meaning, the courts will not look at the intention of the parties involved but will interpret the contract based on its wording;
  2. If the parties have no previous contract, they share a common intention and by mistake they execute a contract which does not mirror that intention – the courts will apply a subjective standard to its rectification (which must have been held at the time the contract was executed and must have been the subject of an "outward expression of accord"). This means they will take the intention of the parties into consideration when interpreting the contract.

Conclusion

While it is possible for contracts to be rectified by the courts, the standard is still high in order to get as far as a rectification, let alone once there, to establish the above tests.

Commercial contracts are integral to any business and getting them right the first time protects your business and its standing in the marketplace.

Footnote

1. [2019] EWCA Civ 1361

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions