A commercial agreement is a legally binding agreement between the parties, which outlines what each party can or cannot do while in a contractual relationship. The agreement lays out and sets up the terms under which each party is to carry out agreed-upon tasks, activities or transactions.
Business relationships often start out as a mutual goal, a shared idea, or from a discussion. The intent behind such interactions usually generates a sense of trust, which is needed for any successful commercial relationship.
However, relying on verbal agreements and trust alone to drive the relationship forward is not enough – not when your entire business is at stake.
Below we discuss the importance of commercial agreements – their benefits to you, the different kinds you may come across and what to do when drafting or receiving one.
Benefits of a Commercial Agreement
While it may seem a long and arduous process to get all parties to agree and negotiate on terms, it is well worth the time and effort to avoid any costly legal conflicts in the future.
Protection measures – This is perhaps the number one benefit of commercial agreements. Protecting your company’s assets should be first and foremost reflected throughout. You can define the terms and conditions to protect all parties involved.
Consequences – Including consequences or outcomes to an agreement is important. This aspect of a commercial agreement outlines under what fees, obligations or loss, failed transactions will be penalized.
Dispute resolution -If a dispute arises, all parties have an agreed-upon procedure and process to follow. Because a resolution method is decided upon ahead of time, whether it be arbitration, mediation, conciliation, time and money are saved on legal fees that would otherwise be wasted in the litigation process.
Legal proceedings – In the event that a conflict is escalated to court proceedings, a commercial agreement provides legal counsel and judges with an official document to which they can refer and upon which to base their rulings.
Common Types of Commercial Agreements
With there being an almost limitless number of transactions that can occur between businesses, you can find different types of commercial agreements for almost all situations. Agreements are used to outline relationships, transactions and obligations of each party. Some typical commercial agreements are:
- Purchase of sale agreements
- Asset purchase agreements
- Distribution agreements
- Independent contract agreements
- Service agreements
- Franchise agreements
- Non-solicitation agreements
- Confidentiality agreements
- Non-disclosure agreements
- Joint venture agreements
- Partnership agreements
- Share purchase agreements
- Commercial lease agreements
- Shareholder agreements
In all cases, a corporate lawyer can tailor commercial agreement terms to reflect your corporation’s vision and needs.
Drafting Commercial Agreements
Because commercial business deals are crucial to the success or failure of the businesses involved, regardless of how small or big they are, there are basic things you should keep in mind when drafting commercial agreements.
Since commercial agreements may involve more than one legal jurisdiction, you will need to determine:
- which jurisdiction’s law will be used for the agreement; and
- which jurisdiction will any disputes be settled.
These choices will have a significant impact one the interpretation or enforcement of a commercial agreement.
You should look to eliminate or reconsider any potentially problematic provisions. Finding a compromise that works for both parties is essential to ensuring that the needs of all parties are considered.
Carefully review to see if there are any clauses regarding products, services or their sale may trigger restrictions for other parties.
How OMQ Law Can Help With Commercial Agreements
When presented with an initial draft, you should not sign off on the agreement right away. In such instances, you should seek the aid of a commercial lawyer to avoid any legal risks for your business.
OMQ Law’s commercial lawyers have had years of experience with a wide range of services to help you negotiate, draft or review a commercial agreement.