A commercial contract is a document that should not be taken “lightly”.
Do you run a business and want to work with other companies – clients, suppliers and/or partners? Are you unsure whether you really need to draw up a contract, or whether it would be better to save yourself the “paperwork” since the other party is “trustworthy”?
The above is an unfortunately common and ERRONEOUS position.
This is due to the following reasons:
- Although the parties may currently have an excellent relationship, there is a possibility that it will deteriorate in the future. Should this occur, it will be difficult to prove what obligations and rights each party had. In other words, it will be hard to demonstrate something as straightforward as the agreed price, the payment method, the quality of the services agreed upon, etc.
- If you have a Commercial Contract, then:
- You will have a better company.
- You will be able to organise yourself more effectively.
- You will have a sound structure across your different departments.
- You will have a clear picture of what transactions your company has carried out and is currently conducting with third parties.
- You will always know what rights and obligations you have. This will make it easier for you to fulfil your obligations and enforce your rights against third parties.
- Your company will be far more transparent to any external party.
- Through contracts, you ensure that your collaborators comply with applicable regulations and, in doing so, that your company meets its legal obligations.
Are there any formal requirements?
With the exception of certain specific contracts, there is freedom of form when entering into a contractual relationship with another party. Nevertheless, as noted above, it is advisable to formalise the contract in writing.
What is the minimum content of a contract?
Every relationship between parties must have:
- An object.
- Consent.
- A cause.
That is, the parties must specify what the subject matter of the contract is. This subject matter can never be something that falls outside the scope of commerce or that is contrary to the law (for example, the subject matter of selling marijuana would be illegal).
Likewise, the parties must voluntarily consent to and agree upon the content and terms of their Commercial Contract.
Finally, the cause represents the reason why the parties decide to enter into the relationship and the contractual purpose pursued by each party. For example, “Company X” is engaged in selling fruit and wishes to hire the services of “Company Y”, which specialises in the packaging and labelling of fruit.
In addition to the aforementioned elements, it is highly advisable that the Commercial Contract also includes:
- A proper identification of the parties.
- The place and date of signature by each party. It is very important to bear in mind that each party may sign the contract at a different place and on a different date.
- The duration of the contractual relationship and the consequences of its termination.
- The rights and obligations of the parties.
- The price and method of payment.
- The method of delivery and receipt of the goods/services (identifying when risk and ownership are transferred).
- The applicable law and competent jurisdiction.
- Annexes that clarify the relationship between the parties (describing the services/products, etc.).
It is very important to bear in mind that the contract is binding law between the parties. Therefore, it is strongly inadvisable to use “copy/paste” from the internet. This is because:
- Such a contract will not be tailored to your specific needs;
- You will likely overlook important points when it comes to safeguarding your interests.
For this reason, it is highly recommended to seek appropriate professional advice.
You are welcome to leave any questions or comments below this post, or visit our website: http://intlaw.wualiastudio.com/ to get in touch with us — we will be happy to answer any queries you may have.
Alexandru Lazar Lawyer / Abogado Partner / Socio Mobile: +34 655 83 72 61 Tel: +34 931 125 423
