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Key clauses in business contracts

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Time related contract clauses

Most contracts will, of necessity, include terms about timing, whether in relation to when goods will be delivered or services supplied. Some contracts are very specific about timing, but this in itself may not be enough if the timing is not complied with.

If there is a delay and you don’t include a contract clause that time is of the essence, it is likely that you will have to allow the party in breach a reasonable time period to remedy the breach. You may already have lost confidence in them or strongly suspect they won’t be able to deliver on their promise but you will probably need to wait, suffering inconvenience and possible ongoing loss.

By making time of the essence, you are in effect, elevating the issue of time compliance to a fundamental term of the contract. Breach of a fundamental term of a contract generally means you can act faster and potentially treat the contract as ended, do what you need to do to minimise your inconvenience and loss, and then still potentially pursue the other party. Consequently, this clause is extremely important and should be carefully considered.

Contract cancellation 

A clause should specify which party can cancel the contract (if at all) and on what terms. Care must be taken to restrict the scope of this clause to ensure the promises of each party are definable and not too wide. If they are considered too wide the contract will be rendered void and therefore unenforceable by law.

Variation of contract

Contracts are commonly varied by conduct and in many cases 1 or both parties may believe that this is not possible because there is a written contract in place. Just because you have agreed terms in writing doesn’t mean that variations do not apply. the most common way to vary a contract is by conduct which is inconsistent with the agreed terms.

Contract Waiver clauses

In contract law terms, waiver can result in a contract breach becoming unenforceable if the wronged party is considered not to have taken action over the breach and therefore “accepted the breach” after a specified time. A typical way to deal with this issue is to include a clause clarifying scenarios and timescales for acting on a  breach and what is or is not agreed by the parties as constituting a waiver. The issue can also arise in the context of ensuring that waiving a breach of one part of a contract does not constitute a general waiver.

For example, if a commercial real estate tenant is in rent arrears and is liable for dilapidations or damage, a landlord would want to protect the position if accepting money towards the arrears but at the same time not waiving other breaches.

Entire Agreement clause

Including such a clause in your contract will protect you against claims that you made representations before the contract which were erroneously or deliberately omitted. This is the sort of defence which is commonly raised, either because the defendant genuinely believes it to be the case, or as a tactic, if they breach the contract.

It is important to recognise that whilst an entire agreement clause offers protection about the pre-contract dealings between the parties, it doesn’t protect against any variations, express or implied, to the contract which take place after the contract is entered into. You therefore still nee to be careful not to agree to alter the contract, which can happen by verbal or written communication or by conduct. This, again, is a commonly raised defence if there is a dispute which you as claimant, believe is straightforward i. e if the defendant simply doesn’t pay, they may argue that the reason they aren’t paying is due to some kind of agreement to vary the terms.

If you need guidance or advice on contract terms, whether you are working on a contract or have been offered a contract to consider, we can assist. Understanding the terms of any contract is essential and that mistakes are often made by thinking the contract is “set in stone” or in fact failing to stick to important procedures such as formal notice periods, notifications of breaches and many more areas.

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