New Year, New Contract: Key contractual clauses to 'get right' to avoid commercial disputes

Despite best intentions, many of us may already have fallen foul of the 'new year, new me' mantra. Perhaps we've caved and had a takeaway despite telling ourselves that we would not. Or have we already given up on the couch-to-5km challenge. It doesn’t matter though…we have a whole year to create new habits and implement change.

The same can be said for businesses. A yearly refresh is good practice. Businesses should always re-assess their key contractual relationships and the contracts which underpin those relationships. A buisness should be asking itself, 'Do our contracts best serve our business, and protect us should a dispute arise?'.

With this in mind, here's our top tips for a contractual refresh with a specific focus on avoiding and resolving commercial disputes:

• Use clear and defined terms

Clearly identify and define key terms that significantly impact the rights, responsibilities, and obligations of the parties. Use clear and concise language to avoid confusion and ambiguity. Avoid legal jargon, where possible.

• Set Termination Rights and Notice Provisions

How a contract can be terminated is important. Parties should be clear on what rights they have to bring a contract to an end, and what notice period shall apply. Terminating a contract without the legal right to do so may result in a claim being brought against you.

• Agree a process for resolving disputes

If the business relationship breaks down, you need to have provisions in the contract for dispute resolution. Some key clauses to include, or pay particular attention to, are:

Governing Law / Choice of Law – A boilerplate clause determining that the law of a specific jurisdiction shall apply to the contract. Generally, for companies doing business in the UK, the law of Scotland, or the law of England and Wales, shall govern the performance and interpretation of the contract. However, if you are perhaps contracting with a business whose primary business activity is out with the UK, you may need to consider other alternatives.

Alternative Dispute Resolution – Do you want to stipulate that an alternative method of dispute resolution, such as mediation or arbitration, be utilised before litigation? Litigation can be public, expensive, and take considerable time to conclude. Therefore, exploring whether a dispute can be settled by an alternative means is important to explore and agree.

Expenses – Who shall pay for resolving the dispute? If you'd like the costs to be split between the parties, then it is vital to stipulate this to avoid a further dispute arising over expenses.

So, dust off those contractual documents and give them a re-fresh in line with our top tips noted above. We hope you can avoid a dispute arising, but, if for some reason a dispute does arise, you'll be better placed to deal with it having considered our top tips above, and resolve it efficiently.