What are commercial contacts?

Your ‘commercial contracts’ are the legally binding agreements between you and your customers, suppliers, or business partners. These include everything from your terms of business with customers to your lease agreement (with your landlord and your sub-tenants) and employee agreements. Even your basic indemnities and returns policies form part of your commercial contractual agreements. Reviewing these contracts is vital for business growth and success.

Why it’s important to review your commercial contracts

1. Maintain legal compliance
Much may have changed since your business contracts were originally signed – including the law. Reviewing and updating your commercial contracts regularly ensures that all terms are still legally enforceable. Failing to comply with certain legislation means you risk damage to your reputation, fines, or even business closure.

2. Adapt to changing business needs
As we have seen over the past two months, our whole world can change in a matter of moments. In today’s technology-driven economy, businesses evolve rapidly to meet customers’ growing expectations. You may have recently decided to take your entire enterprise online.

Adapting your existing contracts to meet new demands and requirements will help ease some of the anxiety around how to deal with changes.

3. Streamline for better customer engagement
If your customers don’t understand what they’re signing, they may take their business elsewhere. Simplifying your contracts to make them clearer and more engaging and excluding unnecessary jargon while retaining the legal details that protect you and your customers’ interests will build customer trust. If your customers are primarily consumers, ensuring your contracts comply with Consumer Protection and Protection of Information legislation is essential.

A good place to start is by updating the infamous ‘small print’ – your customer ‘Terms and Conditions’. Turning your ‘Ts and Cs’ into a living document that reflects your current business and customers’ needs ensures their relevance to your business and your customer.

4. Ensure your team understand their legal responsibilities
Change is a constant part of life and business – and this includes your employees. Your team may have changed considerably since the business’ commercial contracts were first signed or you may even be new to the company yourself. Make sure your current team understands their legal rights and obligations.

5. Be prepared for change
Understand the termination clauses in your contracts. You can use these clauses if you’re no longer happy with the agreement or service you’re receiving. Therefore, it’s important to familiarise yourself with your existing contracts so you can make changes that benefit your business.

You won’t be able to update all of your commercial contracts immediately; some may include restrictions that prevent you from updating the contents until a specific date. However, knowing when and how you are entitled to amend or cancel allows for planning and strategising.

How to go about it

1. Get professional help
You probably know your business inside out, but you may not have legal expertise. Hiring a legal professional to review your commercial contracts takes the stress out of this daunting process. A commercial lawyer will spot any legal issues lurking within your existing contracts that you might miss.

2. Pick someone you trust
Pick a lawyer that understands your industry or business focus. Explaining clearly how your business works and what challenges you face will allow your lawyer to understand your specific commercial needs from the start, saving you time and money.

3. Pick a lawyer who shares your vision
Importantly, choose a lawyer who understands you, your values, and your goals.

But, before you go ahead and sign up your new tenant, make sure you have the right lease in place to avoid any problems that might arise. Although leases are nuanced and complex and there is no one-size-fits-all agreement, any lease can be improved upon by avoiding these four common pitfalls.

Agreeing to fix or maintain too much

Simply put, a lease is a contract. Whatever you agree to do in writing, you are responsible for doing. While the Rental Housing Act stipulates certain provisions which are deemed to be part of the lease, agreeing to fix or repair too many things will make you liable to the tenant for the duration of the lease.

Asking the tenant to do too much

Most residential leases are subject to the Consumer Protection Act, which applies both to the wording of the lease and the actual obligations. Furthermore, tenants have recourse to the Rental Housing Tribunal to make determinations on unfair practices in lease agreements. Unduly onerous clauses or one-sided clauses that are considered unfair are unenforceable.

Not adhering to the law regarding deposits

The Rental Housing Act unambiguously states that a deposit paid by the tenant must be invested by the landlord in an interest-bearing account with a financial institution and the landlord must pay the tenant interest at the rate applicable to such account (which may not be less than the rate applicable to a savings account with a financial institution). Subject to the deduction of the reasonable cost of repairing damage and replacing keys, the landlord must repay the deposit with interest to the tenant, within 14 or 21 days of the end of the lease (depending on the situation).

Not reducing rental extensions to writing

The Consumer Protection Act regulates the extension of fixed-term contracts. A landlord must give written notice to a tenant of the pending expiry of a fixed-term agreement not more than 80 business days and not less than 40 business days before the expiry date thereof. The notice must include any material changes to apply in the event of renewal of the lease agreement, as well as any other cancellation or renewal options available to the tenant. If notice is not given, the new month-by-month agreement will be on the old lease agreement terms.

The bottom line

Tenants want to rent in places where they feel that the landlord is fair and reasonable, and where the lease agreement provides both parties with clarity on their rights and obligations.

Ensuring that your lease agreement complies with the relevant legislation and is enforceable in the event of a dispute is essential.