Commercial contracts are legally binding contracts that play a vital role in business operations, helping to define rights, obligations, and enforceability.
A commercial contract is enforceable in court because it meets certain legal requirements, such as such as mutual assent (agreement) and consideration.
A valid commercial contract usually includes:
- Offer – one party proposes a deal.
- Acceptance – the other party agrees to the offer.
- Consideration – something of value is exchanged (e.g., money, goods, services).
- Intention to create legal relations – both parties intend to be legally bound.
- Capacity – the parties must have legal capacity to enter into a contract.
A commercial agreement may or may not be legally binding, however it is a mutual understanding between two or more parties. An agreement is often expressed through offer and acceptance.
CCIWA’s Commercial Law team drafts, reviews, amends and negotiates commercial contracts and agreements for businesses.
Every business is different and our team adopts a bespoke, tailored approach to ensure clients’ specific needs are met.
Why would a business need a commercial contract?
A commercial contract is essential for businesses as it provides legal protection and ensures enforceability in cases of a dispute.
It helps establish clear expectations by outlining the rights and obligations of each party, reducing misunderstandings.
Commercial contracts also aid in risk management by defining liability, warranties, and dispute resolution terms.
They ensure financial security by specifying payment terms and penalties for non-compliance.
Additionally, contracts safeguard confidentiality and intellectual property, ensuring sensitive business information is protected.
By fostering trust and professionalism, contracts strengthen business relationships and include provisions for efficient dispute resolution, saving time and resources.
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FAQs
Q: What makes a contract legally binding?
A: A contract must include an offer, acceptance, consideration, intention, and legal capacity to be enforceable.
Q: Are all commercial agreements legally binding?
A: No, some can be verbal or informal and may not always be enforceable in court.
Q: When do you need legal advice for a legal contract or commercial agreement?
A: If you agree to perform work in exchange for money or another benefit, you’re likely entering into a commercial contract or agreement. Whether it's a verbal handshake deal or a written agreement, this contract/agreement could be legally enforceable.
Always seek legal advice before signing a contract or agreement.
Types of commercial arrangements
There are many types of commercial contracts and agreements. Some common types that CCIWA’s Commercial Legal team can assist with include:
- Express contracts are written or verbal agreements with explicitly stated terms.
- Conditional contracts become binding only when specific conditions are met.
- Joint contracts are where two or more parties share obligations and liabilities.
- Implied contracts are formed through actions or circumstances rather than written or spoken words.
- Fixed-price contracts are where the price is set and does not change, regardless of costs incurred.
- Cost-plus contracts are where a buyer reimburses the seller for costs plus a predetermined profit margin.
- Time and materials contracts bill based on labour time and materials used, common in construction and consulting.
- Service contracts outline the scope, payment, and terms of a service provided by one party to another.
- Shareholder agreements govern the rights, responsibilities, and obligations of a company’s shareholders.
- Business sale agreements outline the terms of buying or selling a business.
- Labour hire agreements are between a labour hire agency and a client for temporary workforce supply.
- Independent contractor agreements define the terms under which an independent contractor provides services.
- Supplier agreements are between businesses and suppliers detailing terms for the supply of goods or services.
- Confidentiality deeds and non-disclosure agreements protects confidential information from disclosure.
- Memorandum of Understanding documents the intentions of the parties. These may be binding or non-binding.
- Terms of trade are standard conditions governing the sale of goods or services between businesses.
- Website terms of use outline user rights and responsibilities when accessing a website.
- Distribution Contracts are between a supplier and distributor in geographic areas, covering commercial activities such as the exclusivity, terms of sale of intellectual property and products.
CCIWA’s commercial lawyers advise that businesses regularly review and update their contracts to ensure they align with current laws and your business needs.
Do you need advice about legal contracts or commercial agreements? Our Commercial Legal team can help. Get in touch on (08) 9365 7746 or via [email protected].
CCIWA Members receive a discount on our legal services. Not a Member? We can still help you, so please get in touch.
