March 11, 2022

Understanding Contractual Terms and Avoiding Disputes

Many contractual disputes between buyer and supplier arise from a lack of understanding of the obligations in a contract.

Many contractual disputes between buyer and supplier arise from a lack of understanding of the contractual terms and obligations in a contract. This webinar identifies key contractual terms and discuss the mechanisms for preventing and resolving disputes.

Within the business sphere, contractual disputes and disagreements are a relatively common occurrence. When entering into a contractual agreement, far too many people fail to fully understand the contractual terms within the agreement, which can then lead to disputes arising. 

A commonly seen issue is where a contract has been drafted, things have gone wrong due to a lack of understanding of the requirements and agreements within the contract, and as a result, business partnerships have started to sour, leading to a complex dispute where no one can agree and no obvious solution in sight. 

When this kind of situation occurs, it’s usually clear that the original contract was drafted in a way that was complex and difficult for everyone to understand. If the agreement had been drafted in a clear and concise way, this situation would not have arisen, and any issues between the two parties would, potentially, have been easier to resolve. 

When a dispute is too complex to resolve through mediation, the next step is to take the dispute to court. This process can be lengthy and affordable for everyone involved, and can also be a complete and utter waste of everyone’s time. 

The reality is that if you fail to understand contractual terms within contracts, the chances of a dispute arising is far higher. That’s why it’s so important that all parties have a clear understanding of the terms within an agreement, to help avoid any issues arising in future. 

Bearing that in mind, below are a few useful tips to take note of when entering into a contractual agreement, including the steps that you can take to help avoid disputes from occurring. As well as how you can ensure that everyone is able to understand the ins and outs of the set out agreement. 

Ensure agreements are properly documented 

The concept of making an agreement based on mutual trust and respect might sound great but the reality is often a complete and utter mess. Instead of making the mistake of failing to get contracts or agreements in writing, ensure that every single contract is properly drafted and documented. For this, working with a professional is a smart move to make, as this will ensure that all documents have been drafted to meet all legal obligations and requirements. 

Taking the time to ensure every aspect of any business partnerships are properly documented will significantly reduce the risk of contractual agreements from occurring. So it’s important that both sides of the contract are aware of the benefits of having a written agreement in place. 

Use clear, concise language in agreements 

When it comes to contractual agreements, it’s important that these documents are drafted in a way that’s clear and concise. Avoid using overly complex jargon, and instead utilise wording that’s simple, clear and easy to understand for everyone involved. 

If there are legal terms that must be used within contracts, make sure that these terms – and their meanings – are properly understood by everyone from both companies. By taking the time to do this, you can help to reduce the chance of a dispute arising further down the line from a lack of understanding relating to the contractual agreement. This is extremely important when it comes to avoiding disputes. 

Educate your team (and partners) on key jargon

A common issue that many companies struggle with when it comes to contractual agreements is a lack of understanding of the key jargon being used within them. 

That’s why making sure that everyone is properly educated on the terms being used is so important, as this can help to ensure that any contractual dispute risks are minimised. Because there’s a clear understanding around what the contract says and determines for the partnership, both now and in the future. 

There are lots of useful tools for understanding key contractual terms, including this video that we have made as an educational tool for helping to prevent contractual issues and resolve disputes. This is an extremely useful tool for understanding all aspects of the contracting process, from the jargon to to the best means of dispute resolution management that every business owner needs to know and be aware of. 

Store all key documents carefully 

A mistake that you don’t want to make is to fail to store all the key documents carefully and in a secure place. Because without those documents, any contractual agreement will be deemed useless. So it’s vital that you make sure to store them securely in a place where you will have access to them as and when you need them. 

It’s also worth keeping a digital copy of every agreement on a secure computer, external storage device or on cloud storage (or all three), to make sure that you have a backup available should the original copy ever get lost, damaged or destroyed. 

Include mechanisms for dispute resolution 

A great tip for stopping disputes before they ever properly start is to include dispute-resolving mechanisms within each contractual agreement. This means adding in clauses to your key documents that set out steps that should be used in the case of a dispute arising between the two parties. 

By including these steps in contractual agreements, you can ensure that should an issue arise, there’s a clear (and previously agreed upon) means for resolving said issue. 

Set out time frames 

Instead of creating an open-ended contract, make sure to set out time frames within the agreement for how long the work or partnership should continue. This means thinking about project deadlines and key dates and writing these into the contract, to ensure that everyone is aware of all the key contractual dates. 

By setting out clear time frames for delivery and project completion, this can also help to avoid causing disputes as there’s a clearly set out time frame that everyone is in agreement on. 

There you have it, a simple guide to understanding contractual terms and avoiding contract-related disputes.