Optimism, energy and fresh ideas are some of the bright prospects that young entrepreneurs can bring to business. Openness to new things, the ability to quickly recover from mistakes and the ability to use new technologies are also great qualities of youth that can help build a successful business. But advice on a commercial agreement from people who have been in business for a long time never hurts.
Due to the current economic climate, these inherent qualities make entrepreneurship a popular option if you consider starting your own business a viable career path.
A fundamental issue to consider when starting your new business is to make sure you have the right commercial agreements in place.
Starting a business can come with a variety of risks, which is why we’ve summarized a number of business deals you should consider as a young entrepreneur.
Table of Contents
What is a commercial agreement?
A commercial agreement means a document agreed upon by two companies containing several clauses, the terms of the agreement, and specifying what each party agrees to do under the contract.
There is a wide range of commercial agreements for businesses. Below are the most popular ones:
- Terms and Conditions – Allows business owners to set their own rules
- Intellectual property agreement and copyright – Protects business ideas
- Agreement on joint activity – Introduced when a business wants to team up with another business to achieve a specific goal.
- Agency or distributor agreement – A company agrees to act on behalf of another company (agency agreement) and decides to supply another company’s products (distributor agreement).
Commercial contract form
A commercial agreement does not have to be in writing; the contract agreed between the parties also matters.
In certain situations, a contract may also be implied by the conduct of the parties or the law.
However, the best practice is for the commercial agreement between the parties to be in writing.
These benefits provide clarity about what is expected of each party to the agreement.
Key terms of a commercial contract
Terms will vary depending on the type of commercial agreement. However, some key terms are common to all:
Dates
- Specify the start and end date of the agreement
- Agree with the other parties on the duration of the contract
It is beneficial for the parties to establish either a fixed-term contract or a minimum period of a certain amount of time. After that, the contract can be terminated with notice.
Commitments
Include what each party agreed to do.
Payment
The payment clause is a prerequisite. It specifies how and when to make the payment, by whom and to whom.
Insurance
The agreement must specify whether one of the parties must have insurance.
Confidentiality
Another important consideration is whether the agreement or portions of the document should be kept confidential, as is what happens with any intellectual property or business idea and how the parties are allowed to use that intellectual property.
controversy
Another important term is what happens in the event of a dispute between the parties.
The agreement must contain a clause regarding dispute resolution and how such disputes should be heard and resolved.
Commercial agreements also usually include a dispute resolution clause, which specifies how to manage and resolve any dispute.
Some commercial agreements contain a mediation clause, which states that all disputes must be resolved first. The parties then sue in court if they wish, if there is no agreement.
What if you need to terminate a contract?
There should be a clause in the agreement that tells the parties how to terminate the contract. The paragraph specifies the conditions that must be met by both parties. In addition, it includes an appropriate notice period that a party must provide in order to terminate the contract.
With regard to cancellation, since the commercial agreement is likely to be between two businesses rather than between a business and a consumer, there is no cooling off period.
This means that as soon as a commercial agreement is concluded, the parties immediately bind its terms. This is different from the agreement with the consumer, who is given 14 days from the conclusion of the contract to terminate the contract if he changes his mind.
Changes and improvements to your commercial agreement
Business circumstances change, and so does the business. In this case, any changes to the agreement must be reflected in writing. And both parties must agree to this.
Both parties must agree to change the contract. Business circumstances change frequently and therefore require changes to the commercial agreement; both parties must confirm acceptance of the changes in writing.
Drafting a commercial agreement
Commercial agreement advice is essential to help you navigate the challenges you may face as a young entrepreneur and overcome obstacles to growing your business. To ensure that your business is as protected as possible, it is best to seek the advice of a commercial lawyer who can help you draft a commercial agreement.
