Commercial Agreements
Commercial agreements cover a wide range of agreements that a business may choose to enter into. Common examples of commercial agreements include:
- Employment contracts;
- Share agreements;
- Loan agreements;
- Partnership agreements;
- Franchising agreements;
- Joint Venture agreements;
- Sale/Purchase of a business; and
- Contract for the sale of goods and services.
Although each commercial agreement is unique, there are common clauses that each commercial agreement will include in order to protect the interests of those entering into the agreement. These clauses can include:
- Warranties – what each person ‘warrants’ or accepts responsibility for during the term of the agreement;
- Indemnities – what each party will agree to indemnify the other in relation to certain liabilities that may result from a breach of the agreement;
- Termination – the event(s) that must occur in order for one party to “get out” of the agreement;
- Jurisdiction – in the event of a dispute as to the agreement, this clause provides as to what Court will hear your matter. In the majority of cases, if your business operates in NSW, then this all disputes will be heard in the NSW Court System. If you are entering into an agreement with a business interstate, then the ‘jurisdiction’ is made by agreement;
- Severability – this clause allows certain parts of the agreement to be ‘read down’ in the event that the clause is believed to be unreasonable, void, or unenforceable. A Court is able to ‘sever’ the particular clause without affecting the validity and operability of the agreement as a whole; and
- Damages – if one party does an act that causes financial loss to the other, then this clause is important to state that one party can claim ‘damages’, or compensation, from the other party for that loss.
Disputing an Agreement
Interpretation
A common form of dispute in NSW in relation to a commercial agreement is how to interpret a certain clause in the agreement. Although an agreement has been drafted between two (2) people, they may have very different understandings as to how a particular clause in the agreement operates, and the effect that the clause has on their rights and responsibilities under the agreement.
Before you sign any agreement, it is important that you obtain independent legal advice as to your rights under the agreement. This may help to minimise the need to dispute the agreement as you both understand how the agreement is to operate.
Enforceability
A commercial agreement also operates the same way as a contact. Accordingly, the elements of a contract must also be satisfied to determine whether the agreement is enforceable. The elements are:
- Offer;
- Consideration;
- Acceptance; and
- Legal Capacity
An agreement can only be signed by a director or secretary, or a person authorised to sign on their behalf. It is important that you verify that the person who signs the contract is able to do so in their respective capacity. If they do not have authority to sign the agreement, then this may lead a Court to find that there was no valid agreement.
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