It is an exhilarating experience to start up a business in Sydney. You have the idea, the determination, and the vision. However, without sound business contracts, the most viable of business ventures will collapse very soon. Business contracts are the foundations of all successful business interactions. They cover you, your partners, your customers, and your bottom line.
Regardless of whether you are a startup entrepreneur, a sole trader, or an SME, it is imperative that you understand business contracts in NSW.
What Is a Business Contract?
A business contract is a legally binding contract between two or more people. A business contract outlines the rights and responsibilities of all the people involved in the business dealings. In NSW, business contracts can be made verbally, in writing, or even implied. Nevertheless, a written contract will always be better than any other form of business contract.
A verbal contract is hard to enforce because people tend to forget. People change their versions of stories, and what they heard before was never what happened. A well-drafted written contract leaves no room for ambiguity. It gives you legal protection when things go wrong — and in business, things sometimes do.
Why Sydney Entrepreneurs Must Take Contracts Seriously
Sydney is one of the most competitive places for businesses to operate in Australia. Things happen fast. Business relationships develop fast too. And conflicts may emerge even faster.
A lot of entrepreneurs tend to enter into agreements without thoroughly checking the contract terms. Other businesspeople have a template contract which they have picked off the Internet. All these approaches can cost you dearly. The thing is that a contract which does not fit your particular case can put you into legal trouble.
This is one of the reasons why consulting an experienced Sydney lawyer will be one of the best decisions you can make. If you want to understand how professional legal advice can safeguard your business, Visit this page to learn more about what BSM Law’s commercial lawyers offer Sydney business owners.
The Most Common Business Contracts in NSW
Firstly, it is vital to understand the contracts that are applicable to your company. Here are the most frequent contracts that you will be dealing with when working as an entrepreneur from Sydney.
1. Client and Service Agreements
It is the contract that is made between you and your clients. Such agreement will clarify the terms of collaboration, payment, and liabilities of the parties, should there be any breach of obligations. A good service agreement will help you avoid all kinds of payment disputes.
2. Partnership Agreements
Do you plan to open your business together with a partner? Then, you need to make a partnership agreement. It will contain all information about the rights and responsibilities of each partner as well as the share of profits and procedures in case if one of the partners decides to quit.
3. Employment Contracts
Every worker you will be employing needs an employment contract. The labor laws of NSW are quite strict and your employment contract has to conform with the Fair Work Act 2009. A poorly drafted employment contract can expose you to unfair dismissal claims and penalties.
4. Supplier and Vendor Agreements
In case your business deals with suppliers or vendors, then it should have a written contract which covers the delivery schedule, prices, liability clause, and terms for termination of the contract. This protects you if a supplier fails to deliver or suddenly changes their terms.
5. Non-Disclosure Agreements (NDAs)
Whenever you are dealing with any confidential information, then you need to make sure that you are protected against any misuse of such information by signing a non-disclosure agreement.
6. Shareholder Agreements
If your business has more than one shareholder, then such an agreement will cover the decision-making process, how the shares can be sold, and how any dispute can be sorted out. It is one of the most important documents a company can have.
Key Clauses Every Business Contract Should Include
All contracts are not made equal. Here are some important clauses that must be present in a sound business contract in NSW.
Parties and Details – The parties to the contract must be clearly identified by their names and ABN numbers.
Scope of Work or Services – The scope of the work or services must be defined clearly. Ambiguous wording causes problems.
Payment Terms – This section covers the amount of money, payment deadlines, mode of payments, and penalties for delayed payments.
Term and Termination – It states the term of the agreement and also the conditions under which each party may terminate the agreement.
Dispute Resolution — Describe how disputes will be resolved. Options could be mediation, arbitration, and litigation.
Liability Limitations — Protect yourself in case anything goes wrong. You may be able to keep your business from being wiped out financially.
Governing Law — Indicate that this agreement is governed by the laws of NSW. This is important if you do business with people outside NSW.
Confidentiality — Protect your trade secrets, prices, and any other confidential information.
Common Contract Mistakes Sydney Business Owners Make
Even the most seasoned entrepreneurs can run into trouble when making a business agreement. Let’s have a look at some typical blunders to be avoided.
Using general internet templates. Generic templates cannot cover the particular laws in NSW and your company’s individual needs. They will lack key elements and may even be counterproductive.
Neglecting the fine print. No clause goes unimportant. Penalty clauses, automatic renewals and indemnity clauses may become a trap for you if you don’t read between the lines.
Skipping legal review. It is risky indeed to sign a contract without consulting your lawyer first. You may overlook something important and find yourself at a huge disadvantage.
Failing to update contracts. Businesses grow and change. Your business agreements need to be updated as well.
Relying on verbal agreements. Even if you think your business partner is a gentleman and your word is worth a contract, don’t take chances and commit things to paper anyway.
What Happens When a Business Contract Is Breached in NSW?
Breach of Contract involves a failure by a party to fulfill their contractual obligations. If you live in NSW, you have legal options to pursue a breach of contract.
Damages – This is the most commonly used option. You receive compensation for the financial loss suffered.
Specific Performance – Court orders the other party to perform their obligation under the contract.
Rescission – The contract is voided, and both parties are placed back into their previous positions.
Injunctions – A court order which forbids the party to carry out any acts which breach the contract.
Pursuing a breach of contract case is not always easy. There are time limitations under the Limitation Act 1969 (NSW), which is typically six years since the breach of contract occurred.
How a Commercial Lawyer in Sydney Can Help
Entering into business agreements by yourself is hazardous. A competent commercial lawyer in Sydney will provide assistance in numerous ways.
They write a contract which is enforceable, clear and meets your unique requirements. They examine the contract prior to signing to ensure that there are no unfavorable or potentially problematic terms. They negotiate better terms for you. And in case of any disputes, he/she stands up for your interest and strives for the best result for you.
Brander Smith McKnight (BSM Lawyers) is a reputable law firm based in Sydney with more than 50 years of experience. The commercial lawyers at BSM provide legal services to businesses of different sizes – from startups to matured companies.
Final Thoughts
Business contracts are more than just legal documentation; they are the basis of all successful business relationships. In the competitive business environment of NSW, failure to properly draft and understand contracts can mean thousands of dollars lost or even your whole business at risk.
Take contracts seriously from day one. Consult an experienced Sydney lawyer who knows about your industry and your needs. Protect your interests.
When you’re ready to get your contracts in order, contact BSM Law for expert advice and assistance. Arrange your free 20-minute appointment now.
