Introduction
The increased complexity of society and the further sophistication of relations between its members resulted in the appearance of numerous tools that are needed to regulate this very cooperation and guarantee that all parties will be satisfied with the results of this intercourse. Additionally, the rise of business and great attention devoted to the given sphere contributed to the appearance of numerous agents who want to work is this sector and obtain stable revenues. Besides, the creation of new business ventures and evolution of relations between them could not but impact the legal basis that was introduced to protect companies, organisations, and individuals involved in the given activity. For this reason, at the moment one could admit the existence of numerous forms and documents that are introduced to minimise the risks and provide agents with an opportunity to manage the most crucial aspects of the agreement. The appropriate structuring of the needed documents and introduction of the relevant terms and conditions are the most important tasks of any modern businessman.
Terms and conditions and the risks of poor quality, extension of time, increased
First of all, it is important to realise the fact that any manager should recognise the importance of the accompanying documentation as it serves as the guaranty of the preservation of his/her rights and provision of the specified services (Beal 2010). In this regard, the creation of the terms and conditions should be considered the main priority of any businessmen as these might ensure the efficient management of the most important risks and other significant factors. Besides, the government of the UK provides a solid legal basis and guarantees that in case all goals, demands, terms, and conditions are included in the contract and are specified, an agent who notices the violation of these terms is able to file a lawsuit and insist on the preservation of the above-mentioned conditions on the legal basis (Beal 2010). In general, this mechanism could be considered the key factor that determines the functioning of the sphere of business and regulates relations within this very sphere.
The main types of contracts
Besides, the above-mentioned importance of agreements introduces the existence of the following contracts types that should satisfy specific needs.
- Express contract is a sort of agreement which supposes that parties state the terms either orally or in writing at the moment of its formation (Beal 2010).
- Implied contract is a set of obligations that come from a mutual agreement and which have not been expressed in words. It is called in this way as it obviously implies some extra conditions and terms which though should be mentioned in the document.
- Quasi-contract presupposes the absence of any contractual relations between the partners. Thus, such contract is created by virtue of law and could be used when a payment is made by mistake; in case one party is benefited by the activity of another party, etc. (The formation of a contract n.d).
- Bilateral contracts admit the possibility of the movement of considerations in both directions after the contract is concluded.
- Unilateral contract is similar to the previous one though it presupposes the movement only in one direction after the contract is concluded (The formation of a contract n.d).
Valid contracts are enforceable in a court. They have several important features as consensus ad idem, free consent, fulfilment of legal formalities, legal obligations, etc.
- Void contract is not enforceable in a court of law and could be considered deficient.
- Voidable this sort of contract is deficient in only free consent which means that it is concluded under physical or mental pressure.
- Illegal contract could not help agents as its conditions are not respected by the law.
The choice of the appropriate type of contract depends on numerous conditions and goals every party wants to achieve. Moreover, the above-mentioned kinds of agreements introduce a set of important regulations that help to monitor the cooperation between various parties and assure that all their actions will be legal.
The important documentation
Furthermore, to create commercial agreements and guarantee the provision of the needed services or goods, companies or agents use specific documentation that is needed to highlight the most important conditions and expectations. Besides, clearly defined and agreed contracts result in the absence of misunderstandings. That is why all verbal agreements or deals should be documented. In this regard, specific templates that adhere to the formal language are used. The formal paper should be checked by lawyers to guarantee that any mistakes or confusions are avoided. Additionally, the use of formally signed trading documents contributes to the improved outcomes as agents who engage in the cooperation realise the responsibility that comes from the terms of the agreement and try to act in accordance with the above-mentioned specifications.
The sources of express terms
However, there are certain obligations that might also result from the verbal agreement in terms of express contracts. According to the modern law, in case two private individuals make a verbal agreement and accept the responsibility that comes from this deal, it could be considered a legally protected agreement that should be preserved and monitored (Fagundes 2016). Moreover, the sources of express terms come from the power of verbal agreement. It means that businessmen should be ready to formulate their demands and expectations of the would-be cooperation. At the same time, suppliers who are going to cooperate with this very agent should also be ready to understand the terms of the agreement and be ready to act in accordance with them. In case these terms are violated, one of the parties is able to file a lawsuit and demand satisfaction (Sources Of Contractual Terms Notes n.d).
The legal issues that relate to the creation of commercial agreements
Besides, delving into the given issue, one should realise the fact that the above-mentioned types of contracts and agreements are needed to create the legal basis of the cooperation between suppliers and customers. We have already stated the fact that all agents who enter this sort of relations accept the legal responsibility. It means that suppliers should be ready to provide their customers with the goods of the specified quality and needed characteristics. Thus, in case these conditions are not met, there are several legal issues that are needed to regulate the given commercial agreement (Fagundes 2016). For instance, the obligation created by the implied terms of the agreement should be considered an important issue that should be given great attention. Additionally, the legal issues related to the agreement also imply the opportunity to file a lawsuit and protect the rights and demand compliance with obligations.
Core clauses that comprise commercial agreements with customers
Yet, for a commercial agreement to be able to protect the rights of the main agents and could be considered legal, there are several clauses that should be included in it. These are the parties to the contract as they may become legally bound to fulfil obligations. The key definitions should also be included and explained for all agents to obtain the clear vision of the situation. Obligations of the supplier and customer are the core of any agreement as they create the legal basis of the further cooperation and guarantee that the main goals will be accomplished. Moreover, this section could be used when protecting interests and demanding certain actions from a partner. The terms of the contract should also be clearly defined as the termination of any contract is crucial for its further existence.
Additionally, the clause of fees and payment details responsibilities of parties and states which of them is responsible for any fees that should be payable. It will also set the price of products or services that should be paid in accordance with the contract. Very often confidentiality clause is added to the contract to state whether there is the need for the protection of the commercially sensitive information or not (What clauses make up a commercial contract? n.d). It is especially important when two parties are in the formal partnership or try to conceal their relations from the third party. There are also some specific agreements that demand the introduction of the intellectual property clause which identifies an agent that will own intellectual property that could be created (What clauses make up a commercial contract? n.d). Additionally, the liability clause is a significant aspect needed for suppliers of services or goods as it determines whether their liability under the contract could be limited or no. Besides, only in case all these clauses are mentioned in the document, it could serve as the guarantee of the trustful and beneficial relations.
Key provisions of legislation that relate to contracts
Describing the key elements of any contract, it is also vital to mention the major provisions of legislation that are suggested to help the parties to the agreement to protect their rights and remain sure that all important goals will be achieved. For instance, the modern law that regulates the functioning of the given sphere incorporates economic, social, and civil rights to protect the rights of customers, suppliers, and other agents (Fagundes 2016). For this reason, when making a contract, it is crucial to assure that its main terms do not contradict to the basic laws and respect peoples rights. Moreover, these provisions should also serve as the warranty that all participants of a certain deal will act in accordance with the outlined points and respect needs and demands of their partners. Altogether, the provision of the key elements of legislation is an important part of the business world that indicates a states interest in the legitimacy of a certain cooperation and observance of the laws.
The use of contractual KPIs
Besides, any contractual management also demands the use of key performance indicators (KPIs) to determine whether the most important goals were met or not. Additionally, these KPIs might also help to conclude about the success of the venture and its further perspectives. There are several elements that should be explored. The cycle length should obviously be minded when analysing contracting cycles and trying to determine whether there is the need for their cut or not. Furthermore, the adherence to schedule and the consistent quality of the suggested services or goods might be considered another crucial element of the contractual management as these aspects guarantee that all technical and commercial requirements in contracts will be met. Finally, cost-effectiveness is the another crucial aspect as it contributes to the increased efficiency of a certain venture. That is why these KPIs should be incorporated within the one contract to assure that it will remain efficient.
The main types of risks in the performance of contracts
One should also consider the fact that running a business implies numerous risks peculiar to this sphere. For instance, there are economic risks that could have the great impact on the evolution of the project and its further rise. Especially topical it might become in terms of the financial crisis that is not fully overcome yet. Moreover, there are also market risks that could be described as the decrease of the demand for the provided product, the increased level of rivalry, appearance of substitutions, new product entry, etc. These risks are usually analysed by mean of Potters five forces analysis (see Pic. 1. in Appendix) and should obviously be considered when making a deal and determining the possible threats. Additionally, there could also be ethical threats that might come from the differences in mentalities, perspectives, and cultures. Suppliers and customers might have a different opinion on the same issue and try to protect their position. In this regard, the importance of the specified terms and conditions becomes crucial as they should include all above-mentioned risk factors and provide a powerful tool which should be explored in case any misunderstandings appear.
Performance management
Unfortunately, very often the quality of the performance might suffer in the course of the cooperation. Having attracted a partner by the high efficiency and rich choice of the suggested products, a supplier might then alter the approach to the provision of goods and disregard the necessity to adhere to the expected standards to gain some extra income. Under these conditions, performance management becomes especially important. The terms and conditions of any contract should directly formulate the expectations related to the quality of the suggested goods and services. Moreover, it might help to assure that a supplier will comply with the agreed standards and abide by the terms of the agreement. Furthermore, any contract should also outline the measures and penalties that should be used in case one or another partner acts not in accordance with the document. These might be a fee, some extra measures, or even a unilateral cancellation of a contract because of the noncompliance with obligations. That is why the terms of the agreement could be considered a powerful tool needed to control the situation.
Payment responsibilities
Therefore, any deal or contract aims at the acquisition of income. One should also understand that parties want to obtain advantageous position and reduce spending devoted to various activities. Acting in this way, agents might look for the loopholes in a contract. That is why the clause that incorporates payment responsibilities should be given extra attention. It regulates the flow of money and determines who are responsible for the financing of a certain issue. Altogether, cost overruns and cost growths are the aspects that a supplier intents to control and the failure to accomplish this task will undermine the contracts profitability (Fagundes 2016). Both suppliers and their partners try to eliminate this threat. The majority of the European organisations suggest structuring the contract in the way that should foresee possible cost overruns or other misunderstandings with payments to guarantee beneficial cooperation (Beal 2010).
SMART Model
Finally, when making a deal and highlighting the targets for assessing performance, partners often adhere to the SMART model (see Pic. 2 in Appendix) that guarantees that the main goals will be developed considering the most important and topical peculiarities of the market and the tendencies towards the evolution of demand for a certain product or service (Formation of contracts 2008). Moreover, following the SMART model, partners will obviously be able to elaborate the contract and find the most suitable and appropriate approach to the organisation of crucial processes that should determine their would-be partnership. Specification of relevant purposes might also help to focus the efforts on the activities that are really needed. This model will also help to save money. That is why, when creating terms and conditions, partners should obviously keep in mind the fact that all their goals should be analysed in terms of the SMART model.
Battle of forms. Conclusion
In conclusion, the carefully formulated terms and conditions might help to avoid the battle of forms, that could be defined as the clash of standard templates that are exchanged between a buyer and seller (Formation of contracts 2008). It occurs when both parties want to use their template that includes all demands and expectations. Besides, it could be avoided in case a buyer and a supplier work on the agreement together and realise the fact that the specified terms and conditions might result in the increased efficiency of their cooperation. For this reason, the well-thought-out document that incorporates all goals, expectations, conditions, and clauses is a key for the successful partnership between parties. The importance of the given document provides an opportunity to monitor the performance and impact a partner in case its actions do not meet the specified requirements. This monitoring becomes possible due to the specified terms and conditions that predetermine the main aspects of the cooperation between partners.
Reference List
Beal, A 2010, UK: An A to Z of Contract Clauses – Key Terms for your Contracts, Web.
Fagundes, L 2016, The most important KPIs for contract management, Web.
Formation of contracts2008, Web.
Sources Of Contractual Terms Notes n.d., Web.
The formation of a contract n.d., Web.
What clauses make up a commercial contract? n.d., Web.
Appendix
