How to Legislate

What your business contract needs to be speaking about

Lorraine DindiLorraine Dindi
Last updated on:
January 21, 2022
Published on:
November 9, 2021

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When silence does not speak louder than words.

Don’t make assumptions about your contract. While the following key elements may seem obvious to you, if your business contract does not expressly provide for them, then you miss out on a basic level of protection. 

How to define the relationship

We’re all aware that a contract needs to outline the parties involved. However, a prudent business contract goes beyond this: it defines the relationship between the parties. For example, when hiring a consultant, the relationship you probably want to have is that of independent contractors. You do not want the consultant to represent, act for, or bind you. If this is not made clear, you risk creating an agency, employment or even a joint venture relationship and may be under unwanted obligations, such as the duty to establish a workplace pension scheme.  

How to define the term

Where there is an ongoing relationship between parties, a business contract may be silent on its duration and the parties may have different impressions on how long the agreement is meant to last. If either party wants to end the agreement, they may then find themselves unable to do so without sustaining significant losses, financial or otherwise. A commercial divorce may be just as time-consuming, expensive, and taxing as a marital one.

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How to define termination

If the courts need to intervene, there is no guarantee that they will read into a silent contract the same terms you read into it. A termination clause is difficult to imply in a fair and principled way. A judge will consider a wide range of case-specific factors rendering it impossible to predict the outcome. Therefore, a sensible contract should set out its duration and provide for its renewal and termination. 

How to protect confidential information

Another overlooked issue is the handling of important and sensitive information during, and after, your contractual term. There is no common law duty to protect someone else’s confidential information which means that any sensible business contract will expressly impose confidentiality obligations where valuable information is disclosed. It will additionally outline how long these obligations will last and whether they are intended to survive termination of the contract. 

How to define the consequences of breaches

Further, it is prudent to state not only the obligation, but the consequences of breach of this obligation. Your information is likely to be shared widely with agents of the other contracting party (such as lawyers, employers and directors) and you want to ensure that the contracting party is liable for their breaches, and on the behalf of agents who have access to your information on their instruction. 

Legislate provides a robust foundation, ensuring parties negotiate contracts which are prudent and fair. We foresee these difficulties for you, implementing them into our templates to ensure both parties are protected. If you would like to start legislating, read one of our tutorials, book a demo, join our waiting list or receive an invitation from an existing member.

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