Ask the Expert: Board agendaUpdated: 10th Feb 2012 at 09:07am
Chris Davies, a solicitor at Darwin Gray, offers guidance on commercial contracts.
Q: Commercial Contracts – It will be fine….right?
In any relationship there is always the chance of things going sour. As lawyers, we often see disputes and the resulting damage. In business relationships, you really need to be prepared for the worst to ensure that you are not at unreasonable risk financially if it doesn't work out. No matter if a contract is big or small, you need to think about dispute resolution before you actually need to use it!
One of the first things you should think about when putting together a new agreement with a supplier, partner, client, or any other business for that matter, is how to deal with the relationship if it all goes wrong. Some directors might say that this is negative thinking, but it's actually about being sensible and well prepared.
This is especially important for business deals between friends, as often both parties are pouring a lot of resource into the business and these close relationships are the last ones you would expect to end badly. Carefully drafted written agreements can help ensure that in the "unlikely event of a catastrophe" you both end out coming out of the relationship with as few bruises as possible.
The kind of dispute resolution topics a well drafted agreement might include are:
• What happens when a difference arises?
• How does each business/person communicate their "issue" to the other?
• How long has everyone got to work things out, and what's the process?
• If it cannot be resolved easily, what's the next step? Arbitration? Mediation? Something else?
• At what stage might the dispute go to court?
• If it does, who pays costs, and in what circumstances?
You might be reading this thinking that sorting out dispute resolution clauses for your various business agreements probably isn't at the top of your ‘to do’ list. But it probably should be. You should give this a higher priority and make sure you review, oor at least think about, contracts and get something written in place. It could be an absolute saviour when you need it.
You never know when you’ll need it.
Chris deals with corporate transactional work, including share acquisitions, disposals and management buy-outs as well as corporate re-organisations and general company advisory work. This ranges from owner-managed businesses to large private limited companies. Chris also deals with non-contentious intellectual property work including licensing, transactional, research and development/collaboration matters.