Failing to consider and understand all aspects of a contract can have major consequences should a dispute later arise. So what steps can you take to protect your position?
Probably the most important is to ensure the contract provides clarity in respect of the scope of work, price, payment and other key provisions that will govern the relationship between the parties.
If your contract has been agreed orally, it is still binding but it may be difficult to back up should a dispute arise.
When negotiating contracts, parties often focus on the principal commercial terms. Naturally, the scope of work, price and payment are crucial, but other terms can be just as important.
For example, it is common to include clauses limiting liability. It is important for the contract to provide a cap on total liability, otherwise you face the risk of the other party bringing a claim for a potentially unlimited sum.
Once negotiations are over and both sides are happy with what has been agreed, it is important to ensure that all of those terms are incorporated into the final contract.
It is common for contracts to contain ‘entire agreement clauses’. The purpose of these is to limit the terms of the contract to what is actually written in the final version, so any pre-contract negotiations or agreements are excluded.
You must be very careful that what you think has been agreed is precisely what is contained in the final version of the contract, otherwise if a dispute arises later you may find yourself unable to rely on your interpretation.
Although parties generally enter into a contract with the best intentions, it is important to ensure that you have protected your position in case a dispute arises at a later date.
Paul Merrett is a solicitor in the construction team at HBJ Gateley Wareing