Commercial Contracts

Commercial contracts cover a broad spectrum of legal and commercial matters to contractually bind parties. Commercial contracts are executed by contracting parties to ensure that expectations are clear, the benefits of the contract are realised and the parties make good on their obligations. Well-crafted commercial contracts operate as a risk minimisation tool to reduce the risk of disputes and avoid litigation.

Commercial contracts within a business

Common forms of commercial contracts within a business are agreements relating to how a business or company is owned and/or operated. This can include partnership agreements, shareholder agreements and the company constitution.

Partnership agreements

A partnership agreement is a contract between partners in a business which outlines each partner’s responsibilities in the business and how much of the business each partner owns.

The agreement specifies the obligations of each partner to each other and to the business itself, including rules for decision-making and procedures for resolving disputes. Generally, the agreement will contemplate how the business will deal with events such as a partner leaving the business or a partner’s death.

Shareholder agreements

A shareholder agreement is a contract governing the relationship between the directors of a company and the company’s shareholders. The agreement outlines the rights and obligations of shareholders and specifies how the company should be operated by its directors and management.

The agreement operates as a mechanism to safeguard shareholder rights and ensure the fair treatment of shareholders. A shareholder agreement can be completely customised to suit the nuances of specific business structures and operations.

Company constitutions

A company constitution is a corporate governance document which outlines a set of rules which govern the operation of the company and the company’s relationship with its directors and shareholders.

Common provisions in a company constitution explain:

• • how company documents can be executed;
  • the procedures for company meetings;
  • powers of directors;
  • how directors can be appointed and removed; and
  • how the constitution can be amended.

Most companies adopt a constitution on their creation. Companies which do not adopt a constitution on creation are governed by the replaceable rules contained in the Corporations Act 2001 (Cth).

Joint venture agreement

Sometimes if more than one business is joining forces to undertake a new opportunity, they may operate under a joint venture agreement.

This may look at various factors such as how each business will get paid and what work other consideration each business will contribute to the joint venture. Similar to other agreements within a business, a joint venture agreement generally sets out a process for making decisions in relation to the joint venture and the opportunity.

Transaction documents

Common forms of transaction documents include sale of business documents. The sale of any business can be complex. Ensuring the smooth transfer of the business involves the organisation of various important documentation.

Relevant documents to be drafted in a sale of a business are likely to include:

1. a terms sheet (heads of agreement);
2. a sale of business agreement; and
3. confidentiality agreement and a term sheet (heads of agreement).

Agreement documents   

Common forms of commercial agreement documents include contractor agreements and services agreements.

Contractor agreement

A contractor agreement is a contract governing the relationship between a business and a contractor for the provision of services.

The agreement will specify the scope of services to be performed by the contractor, including timeframes for completion and remuneration. Other relevant provisions likely to be included in the agreement are a confidentiality provision, intellectual property rights provision and dispute resolution and termination procedures.

Services agreement

A services agreement is a contract governing the relationship between a business and service provider. Much like a contractor agreement, a services agreement will specify the scope of services to be performed by the service provider and can be customised to the unique circumstances of the business and service provider.

Important considerations

Regardless of the content or circumstances of a commercial contract, various considerations should always be addressed. Some of these considerations include:

• ensuring you are contracting with the correct party;
• making sure the contract is properly made;
• establishing a procedure to make variations to the contract; and
• specifying clear termination and remedy procedures.

How IM Lawyers can help

At IM Lawyers, we have the expertise to assist with drafting and reviewing commercial contracts to best suit your personal and business needs.