When you think of a contract, you would likely picture a stack of documents that you need to sign with regards to something you have purchased for instance, or an employee contract stipulating his/her tasks and other essential information regarding said employment.

True to human nature, most of us just sign contractual agreements without giving them a second glance. Doing this, however, could have serious repercussions eventually.

A contract serves as a record of agreement between two parties and ensures that both parties comply with the terms of the original agreement which they entered.

In a nutshell, contracts are thus a non-negotiable and integral part of business and should be drafted in a proper manner from the get-go, in order to ensure that it complies with the specific requirements, needs and circumstances pertaining thereto and as has been agreed to between the applicable parties entering into such an agreement.

Contracts prevent conflicts and ensure company compliance

Whenever a contract is concluded and signed, all the parties to such an agreement must be assured that the terms contained therein, has been agreed to, as well as offers equal protection to all the parties to such an agreement. The details of the contract must be negotiated prior to any party placing his/her/its signature on that piece of paper, and only once all the parties involved in the process are fully satisfied with the terms contained therein.

Following this process will ensure that conflicts are avoided, and risks minimised. When it comes to employee contracts, these ensure company compliance on an ongoing basis as well as protects both employee and employee alike.

Contracts protect both parties

A contract concluded between a service provider and a client for instance, ensures that the service provider can be held accountable for non-service delivery and the client for non-payment for example. Should a disagreement arise between the parties who concluded the agreement, such parties will be able to revert to the signed contract, which may also form the basis when it comes to legal action, should the conflict not be resolved amicably between them.

Reference to the contract terms can of course go both ways, as both the service provider for instance and the client can be held accountable for a breach of the contract terms.

Contracts signify professionalism

There should be no hesitation to conclude an agreement, even if the parties have done business with one another for years. Contracts are an integral part of everyday business and may be seen as a ‘stamp of professionalism,’ if you will, for the company.

In the event where one party to a business relationship hesitates to conclude an agreement, such hesitation could serve as a warning sign due to the fact that the business relationship has not been concluded in a formal manner, which may cause problems for either party in the future, should there be a breach of the business terms agreed to between them. Always remember that contracts serve to mitigate risk in a business relationship, no matter who the parties might be, nor what their relationship might look like at the onset.

Contracts specify which rights are purchased and which are retained

Contracting parties who are in the creative business industry for example, often sell their trademarked or copy righted works (including art, designs, books etc.) to larger businesses for instance, whereby such larger entities then make use of such works in numerous ways.

In such an instance, a formally concluded contract would stipulate which rights the seller retains and which rights the purchaser is purchasing. Once again, a properly constructed contract will protect both parties and will eliminate possible misunderstandings as well as mitigate risk.

At Law On The Go, our passion is Contract Drafting and Commercial Law. Because contracts are so company-specific, we draft them in a manner which is tailor-made to each clients’ specific needs. We also offer clients the option of amending and/or reviewing existing contracts or contracts which may be concluded and where the client requires legal input and advice on.

Contact us today for all your contract-drafting requirements: 011 201 5154 / info@lotg.co.za