ARTICLE
25 September 2024

The Importance Of Safeguarding Your Interests In Commercial Agreements

AB
Asare Bediako & Co

Contributor

Asare Bediako and Co is a law firm in Ghana which places premium on best customer experience to drive client satisfaction. The firm was incorporated to offer and deliver wide range legal services in response to the ever changing and positive economic developments in Ghana, Africa and worldwide. We provide highly professional quality work which are fashioned and tailored to give our clients the quality and satisfaction they require.
Our world is one of constant commercial and economic activity. As humans, like everything else in our lives, there is the need to regulate our relationships with each other, especially business relationships.
Ghana Corporate/Commercial Law

Our world is one of constant commercial and economic activity. As humans, like everything else in our lives, there is the need to regulate our relationships with each other, especially business relationships. Why? Uncertainty and unpredictability. Complete and blind trust in another party can only get you so far. On the other hand, a properly worded and structured agreement ensures compliance and allows for certainty. In the event that compliance fails, the Agreement provides a backup so as to protect the interests of both parties or at least, that of the victim of the non-compliance.

Following this, there are a number of key terms that ought to appear in any Commercial Agreement. This article focuses on the roles 6 key terms play in a Commercial Agreement.

Duration & Termination

Firstly, the issue of Termination has to be clearly stated. Everything that begins must surely come to an end. It is detrimental and quite reckless to leave the duration of an Agreement up to chance. The success of a business transaction depends on the level of control the parties have over the entire transaction. Things may not always go as planned during a business transaction which is why it is important to give the parties the opportunity to exit, either with consequences or without. This clause will therefore set out the circumstances under which either party or both parties may terminate the contract. Contracts usually have a duration period or an end date which means after that period, the contract is automatically terminated. However, the parties may wish to terminate the Agreement before the termination date. This is why it is necessary to include the termination clause to regulate why and how the Agreement is to be terminated.

Confidentiality/Nondisclosure

A lot of businesses are run successfully due to the confidential information they possess. It may be a trade secret a special recipe or simply employee and client information that provide the catalyst for growth and monopoly in a particular market. However, as with most businesses, there may be the need to enter some Agreement where sensitive and confidential information are likely to be shared with an outside party. In such situations confidentiality or nondisclosure clauses are significant as they prevent the other party from disclosing any information discovered in the course of the transaction. This is another method used to safeguard the interests of the parties to the transaction such that even if the transaction is not successful, the parties are still bound by the Confidentiality or nondisclosure clause.

Force Majeure

This phrase, in the literal sense, means "greater force". It can also be referred to as an Act of God. This gives the impression that whatever this force may be, it is one that cannot be controlled by any of the parties as with any act of God. This clause is included in contracts to protect the parties from circumstances that are beyond anyone's control and one that they were not likely to foresee in their business or in the course of the transaction. This may appear in the form of natural disasters, national or global pandemics, terrorist attacks or even war. The list is exhaustive but it should be, as stated earlier, one that is beyond anyone's control and unforeseen. This clause ensures that if there is a failure to perform under the contract, it would not be considered a breach by any of the parties.

Governance & Jurisdiction

With how far the world has come, it is a common practice for businesses or individuals to engage in cross-border transactions. Thus, a person or entity in Ghana may engage in a business transaction with another in Nigeria or even in the UK. When this happens, there exists some confusion as to which country's laws will govern and regulate the contract. It is quite clear that the law regulating Contracts in Ghana are different from that of Nigeria and the UK, albeit bearing certain similarities. However, to avoid the confusion in interpreting and enforcing the contract, it is prudent to categorically state which particular country's law will govern the contract and which country will have jurisdiction. When explicitly stated, a party cannot ignore this clause and select another country's laws to govern the contract and assume jurisdiction of the Agreement.

Dispute Resolution

As with all situations when two or more people come together, there is likely to be a conflict in a business transaction even with a well drafted contract. It may in the form of interpretation or non-compliance. When this occurs, it is important to have a clause that spells out how exactly the dispute is to be resolved thereby leaving no room for confusion. There are usually two options when it comes to such contractual disputes; Litigation or Alternative Dispute Resolution. This clause allows the parties to choose how they would like to resolve their conflict based on the pros and cons of the dispute resolution methods and what would suit their interests. Most contracts currently include arbitration clauses as they are considered more confidential and time-saving as compared to litigation. Arbitration can however be expensive depending on the nature of the contract.

Modification & Entire Agreement

Lastly, this clause seeks to prevent either party from changing the terms of the Agreement unilaterally. The Modification clause includes terms on how any amendments or modifications to any part of the agreement are to be carried out. It will involve both parties consenting to the amendment and appending their signatures once again to avoid the situation where one party is blindsided.

Following this the Entire Agreement Clause is necessary to state that the terms contained in the Contract constitute the agreement between or amongst the parties and any other oral agreements have been written down in the Agreement. In this case, none of the parties cannot and will not be allowed to introduce new terms that are not contained in the written down Agreement.

Conclusion

It is important to maintain control of any business transaction. That aids in its success. It is thus important to carefully consider what your goals are and what you seek to protect when entering into a transaction. This enables you to contemplate the events that are likely to arise in the course of the transaction and include clauses that will safeguard your interests.

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.

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