Optimism, energy, and fresh ideas are some of the brilliant perspectives that young entrepreneurs can bring to running a business. Being more open to trying new things, having the resilience to bounce back quickly from mistakes, and being able to utilize new technologies are also great qualities of youth that can help to build successful businesses. But, commercial agreement advice from individuals who have been in business longer never hurts.
Due to the current economic climate, these intrinsic qualities make entrepreneurship a popular option if you see starting your own business as a viable career path.
A fundamental matter to consider when you start your new business is to ensure you have the correct commercial agreements in place.
Starting a business can be fraught with various risks, so we’ve summarized the range of commercial agreements you should consider as a young entrepreneur.
What is a Commercial Agreement?
A commercial agreement means a document agreed upon by two businesses, containing several clauses, the terms of the agreement, and setting out what each party agrees to do under the contract.
There is a wide range of commercial agreements for a business. Below are the most popular ones:
- Terms and conditions – Allows business owners to set their rules
- Intellectual property agreement and copyright – Protects a business’ ideas
- A joint venture agreement – Put in place when the business wishes to team up with another business to achieve a certain aim
- Agency or distribution agreement – A business agrees to act on behalf of another company (an agency agreement) and decides to deliver another business’ products (a distribution agreement)
The Form of a Commercial Agreement
A commercial agreement does not have to be in writing; a contract agreed upon between the parties also counts.
In certain situations, a contract can also be implied from the parties’ conduct or legislation.
The best practice, however, is for a commercial agreement to be agreed upon in writing between the parties.
These benefits ensure clarity regarding what is expected from each party to the agreement.
Key Commercial Contract Terms
The terms will vary with the type of commercial agreement. However, some key terms are common to all:
- Include the date when the agreement starts and finishes
- Agree with the rest of the parties on the length of the contract
It is beneficial for the parties to set up either a fixed-term agreement or a minimum period of a certain amount of time. After this, the agreement can be brought to an end with the provision of notice.
Include what each party has agreed to do.
Provision for payment is a necessary term. This sets out how and when to make a payment, by who, and to whom.
The agreement should mention whether one party is to have insurance.
Whether the agreement or parts of the document are to be kept confidential is another important aspect, as is what happens to any intellectual property or business ideas and how the parties are allowed to use this intellectual property.
A further important term is what happens in the event of a dispute between the parties.
The agreement should contain a clause dealing with dispute resolution and how such disputes should be heard and resolved.
Commercial agreements also commonly include a dispute resolution clause that sets out how to manage and deal with any dispute.
Certain commercial agreements contain a mediation clause that states that all disputes are to be mediated first. Then, parties start a court claim if they want, if they lack an agreement.
What If You Need to Cancel the Contract?
The agreement should have a clause that tells the parties how to terminate the contract. The clause sets out the conditions that both parties need to meet. Additionally, it includes the relevant period of notice that a party needs to provide to bring the contract to an end.
Concerning cancellation, as a commercial agreement is likely to be between two businesses and not between a business and a consumer, there is no cooling-off period.
This is to say that once a commercial agreement is entered into, the parties are bound by its terms immediately. This is different from an agreement with a consumer who is given 14 days from entering into the contract to cancel the contract if they change their minds.
Alterations and Improvements in Your Commercial Agreement
Business circumstances change, so business also changes. In this scenario, any changes to the agreement need to reflect in writing. And both parties need to agree to it.
Both parties need to agree to change the contract. It is common for business circumstances to change and so require an alteration to the commercial agreement; both parties should confirm the acceptance of the changes in writing.
Drafting a Commercial Agreement
Commercial agreement advice is essential to help you navigate challenges you can face as a young entrepreneur and overcome barriers to growing your business. To ensure you protect your business in the best way possible, it’s best to seek the advice of a commercial solicitor to assist with drafting your commercial agreement.