What Is A Business Contract?

Business contracts are legally binding agreements between two or more parties.

Contracts, however, can only validly exist when certain specific conditions are met, namely, both buyer and seller must intend to make a contract and be capable of making it, an offer has to be made and accepted and something of value will need to exchanged or change hands, whether that’s money, goods or services. Valid contracts don’t have to be written: oral contracts can generally be equally binding.

However, certain specific  business contracts, such as property leases over three years, must be written.

It is also important to remember that although only those terms which were agreed before or at the time of making the contract will apply, the law does allow ‘implied terms’ to be incorporated into contracts at a later date. The terms of the contract govern what the seller and buyer is each obliged to do, and spell out what legal action can be taken if one party fails to perform their part of the contract.

What are these ‘implied contractual terms’?

Every single business contract, whether written or oral, will have implied terms, even if these are not necessarily immediately obvious. Not all contracts will have the same implied contractual terms, and it is sometimes possible to specifically exclude some of these implied terms from a contract, however this must not be done unreasonably.

The most common types of implied contractual terms are:

  • A seller must be entitled to sell whatever they are trying to sell. If a purchaser buys something from someone who does not have ownership, and therefore has no right to sell, they have the right to get their money back from the seller.
  • The sold goods have to match their description. All descriptions on labels or claims made by the seller must be accurate.
  • The goods sold in the course of business must be of satisfactory or merchantable quality.
  • The goods must be fit for the purpose.
  • The goods sold after providing a sample must specifically match, and be of the same quality of the sample.

Other standard contractual terms.

Every business is allowed by law to produce a ‘terms of trading document’ which sets out the standard conditions for all its contractual dealings. Some of the common clauses may include things like:

  • The description/specification of the products or services being sold,
  • The details of price,
  • The payment date,
  • The payment method and the delivery terms and conditions.

Some terms of trading documents may also include:

  • A guarantee for a specific period of time (over and above the buyer’s statutory rights).
  • A clause which gives the seller the right to retain legal ownership of the goods until they have been fully paid for.
  • The right to delay the delivery due to circumstances beyond the business’s control.
  • Clauses limiting the seller’s liability (which are not allowed to alter a consumer’s liability), or a clause which states that nobody, apart form the buyer and seller, is to be given any rights under the contract.

In any legal dealings it is always preferable to consult with, and employ the services of, a qualified solicitor. Nowhere is this better illustrated than in business contracts. Even those with some understanding of the legal process will not have the expertise or knowledge of a dedicated professional, so they run the risk of making mistakes which could prove to be very costly. In any business dealings, great care and attention to detail is required. Only a qualified solicitor will be able to help businesses draw up contracts, specify which terms and conditions are appropriate and deal with any contractual problems or issues that might arise.

To find out more information about how Harold Stock’s commercial solicitors can help your business, call us now on 01457 835597 or email info@haroldstock.com.

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