What Things Should Be Included When Drafting A Commercial Contract? Get legal advice

June 18, 2021    commerciallawyersblog   
What Things Should Be Included When Drafting A Commercial Contract? Get legal advice

There are certain things you should consider when reviewing or drafting a commercial contract. A commercial agreement usually addresses pricing and payment, representation and warranties, limitations on liability, etc. However, whenever a counsel makes a draft of the commercial contract or reviews it, he should first consult the specific law for his state and industry.

What Are The Things Or Terms You Have To Include While Drafting A Commercial Contract?

The terms that you should include in the contract are as follows. 

  • Material Terms In The Drafting Or Review Of The Agreement

All the key business provisions of the agreement must be drafted or reviewed and based on the nature of the deal. You have to include material terms. Pricing and payment information, services that will be provided or goods sold, ordering procedures, return and refund information, shipment terms are some of these terms to mention.

  • Standard Terms And Conditions

You also have to include the other standard terms and conditions like indemnifications, insurance, limitations on liability, representations and warranties, ownership and licensing rights, dispute resolution terms, audit and inspection rights, no assignment, etc.

  • Terms That Address Primary Rights And Obligations Of Each Party

Here you need to mention terms like ordering and return procedures, territory, shipment and delivery times, minimum guarantee information, delivery and deadline information, and key personnel. You also have to include warranty information and terms related to review rejection and approval.

What Do You Need To Do While Drafting A Commercial Contract?

Not only including these critical terms, but you also have to perform the following duties. A qualified commercial contract lawyer may help you with this.

You Have To Meet With Business Executives

  • Here you should see that all agreed terms of business should be sent to the counsel from the appropriate business executives. 
  • A formal process needs to be followed for involving the attorney. 
  • You have to consider these factors that will impact the negotiations, review, or drafting of the agreement. These factors include the term of the agreement, the relative bargaining power of both parties, the importance of the parties’ relationship, the importance of the company’s overall business deal, antitrust issues, and many other things. 
  • The scope of the transaction includes financial value, exclusivity and territory. 
  • In addition, you have to identify the agreement, the critical dates and obviously, the parties. 

You Have To Set Up The Pricing And Payment Terms

First, you have to consider the transaction type when you will determine the pricing. Here, you have to select a pricing structure that may be fixed or formula-based, like based on time or materials. You should also take the pricing subject and the refund rights provision into account and choose the due dates for payments that can be set at particular dates according to events like ‘completion of all services.’  

You Have To Set Up And Make A Review Of Representations And Warranties

Here, you need to incorporate different representations and warranties to give space to losses. These representations and warranties include valid existences of both the parties, their right and ability to carry out business contemplation according to the agreement, and their legal rights to enter into the contract and perform the terms without going against any laws or agreements. 

  • You need to also include other representations and warranties like an obligation without violating any intellectual property rights for the third party in a creative services agreement.
  • You should have some strict restrictions when making warranties and representations. You may limit their scope and survival period, disclose exceptions, or prevent term extensions to any third party.
  • Not only restrictions, but you should also give your attention to the overall protection like protecting broadly phrased provisions, removing restrictions in some cases, removing a knowledge qualifier that you may have added for restrictions.

Set Up And Review The Indemnifications To Allocate The Risks

You have to choose which types of liabilities you should cover and which you should exclude.

  • The scope of recoverable losses should be addressed.
  • You may also think of incorporating a defence obligation. 
  • You should also include a procedure of indemnification and make sure that it provides notification and cooperation requirements.

You May Think Of Including A Limitation On The Liability Clause

  • First, you have to analyse whether incorporating a limitation of liability clause will benefit the client or hurt him.
  • Then, you can think of eliminating the liability of one or both parties for particular damage types like indirect, punitive, special, incidental, etc.
  • And then, you should see whether the limitation will apply to the whole agreement or particular provisions.

What’s More?

Other performing duties include reviewing insurance obligations, agreement terms and termination provisions, ownership and licensing rights, audit and inspection rights, and protecting confidential information. For necessary help, it is practical to look for commercial contract lawyers in Perth. Firms like Commercial Lawyers Perth WA can help you find the best commercial lawyers.


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