Contracts & terms

As a general rule, a contract becomes legally binding when the parties have entered into an agreement, for example through an offer and acceptance. Oral agreements may also be legally binding, although specific transactions may be subject to written form requirements or other formalities.

In certain circumstances, a contract may be set aside in whole or in part, for example due to fraud, duress, or unfair contractual terms. Termination for breach of contract generally requires that the other party has committed a material breach of its obligations. The available remedies depend on the contract and the specific circumstances of the case.

If a customer, supplier, or business partner breaches an agreement, you should first review the contract and document what has occurred. You should then notify the other party in writing as soon as possible, specifying which obligations have not been fulfilled and what remedy you require.

Depending on the agreement and the nature of the breach, you may be entitled to remedies such as performance, repair, price reduction, damages, or termination. In many cases, the breaching party should be given a reasonable opportunity to remedy the breach before further action is taken.

If a contract is unclear or contains conflicting provisions, it must be interpreted based on factors such as its wording, purpose, and the overall contractual framework. Correspondence, negotiations, and the subsequent conduct of the parties may also be relevant.

You should determine whether the contract establishes an order of precedence between the main agreement, schedules, annexes, and standard terms. If the parties reach a common understanding, it should be documented in a written amendment to avoid future uncertainty.

Exclusivity means that one party is granted an exclusive right or agrees to work exclusively with a particular counterparty. Examples include a distributor’s exclusive rights within a territory or a customer’s obligation to purchase specific products from a single supplier.

The agreement should clearly define which products, customers, and territories are covered, how long the exclusivity applies, and how it may be terminated. Exclusivity arrangements must also be assessed under competition law, as certain types of exclusive rights and sales restrictions may not be lawful.

A limitation of liability clause restricts the types of losses for which a party may be held liable or limits the amount of compensation that can be claimed. A cap on damages is typically a financial ceiling, such as a fixed amount or a percentage of the contract value.

The contract should specify whether the cap applies per claim or in aggregate, which claims are covered, and whether any claims are excluded from the limitation. A limitation of liability clause does not necessarily apply in every situation, and its validity and scope depend on the wording of the clause, applicable law, and the specific circumstances.

An effective allocation of liability and risk should reflect which party is best positioned to manage specific risks and the consequences of errors, delays, or non-performance. The contract should therefore clearly define the parties’ deliverables, responsibilities, timelines, quality standards, and remedies for breach.

It is also important to address insurance requirements, subcontractors, limitations of liability, and force majeure events. The contractual framework should be consistent to ensure that a business does not assume risks that it cannot reasonably manage or insure against.

A contractual dispute should first be assessed by reviewing the agreement, payment history, and supporting documentation. Claims and objections should be submitted in writing, and any notification or limitation periods must be observed.

Many disputes can be resolved through negotiation or mediation. If this is unsuccessful, the matter may be referred to the courts or arbitration if agreed between the parties. In cases involving suspected fraud, it may also be appropriate to contact the bank and the police immediately. However, filing a police report does not in itself guarantee recovery of funds.

Terms and conditions of sale, payment, and delivery should be tailored to the company’s products, customers, and sales model. They should address matters such as pricing, payment, delivery, transfer of risk, defects, liability, and dispute resolution.

The terms must be incorporated into the contract no later than the time the agreement is concluded. Particularly burdensome or unusual provisions should be specifically highlighted. When dealing with consumers, mandatory consumer protection rules also apply, including requirements relating to information obligations, statutory warranty rights, and, where applicable, withdrawal rights.

A warranty certificate should clearly identify the warrantor, the products and circumstances covered, the warranty period, and the procedure for making a claim. Any limitations should be clearly stated and consistent with the company’s marketing materials.

Additional requirements apply to consumer warranties regarding content, language, and delivery on a durable medium. The warranty must expressly state that the consumer’s statutory rights against the seller remain unaffected. A warranty cannot replace or restrict statutory warranty rights.

A collaboration agreement should define the purpose of the cooperation, the responsibilities of each party, deliverables, timelines, and payment arrangements. It should also address ownership of materials and deliverables, confidentiality obligations, liability, and any processing of personal data.

The agreement should further establish procedures for handling amendments, disputes, and termination. Clear provisions governing notice periods, ongoing projects, and customer relationships can help prevent disputes if the collaboration does not develop as expected.

A distribution or reseller agreement should regulate matters such as products, sales territory, exclusivity arrangements, purchasing obligations, payment terms, marketing activities, and trademark use. It is also important to address the treatment of inventory, customers, and outstanding orders upon termination.

The agreement must comply with competition law, including rules governing resale prices and restrictions on customer groups and territories. It should also be assessed whether the relationship constitutes a commercial agency arrangement, which may give rise to specific statutory rights upon termination.

A business-to-business purchase agreement should clearly describe the goods or services being purchased, pricing, payment terms, delivery arrangements, and the point at which risk transfers from seller to buyer. It should also address inspection obligations, claims procedures, warranties, and the parties’ respective remedies in the event of defects or delay.

In commercial transactions, many statutory sale of goods rules may be modified by agreement. The contract and any standard terms should therefore be reviewed together. For international transactions, it is also important to determine the governing law, jurisdiction, and whether international sales conventions apply.

Contracts for a new business or service should be based on a clear understanding of what the business provides, to whom, and under what terms. The first step is therefore to identify the business model, payment structure, and key risks.

Appropriate customer agreements, supplier agreements, collaboration agreements, and standard terms and conditions can then be prepared. The contracts should also take into account industry-specific requirements, consumer protection rules, personal data regulations, and ownership of intellectual property or technology where relevant.

Yes. In certain circumstances, a business may charge a cancellation fee if such a fee has been validly agreed upon. The agreement should clearly state when the fee applies and how it is calculated. If no cancellation fee has been agreed, the business may, depending on the circumstances, have a claim for documented losses.

An unreasonable cancellation fee may be reduced or set aside. In consumer contracts, the fee must also comply with consumer protection legislation and cannot be used to circumvent a statutory right of withdrawal.