What a contract means / A well-made contract prevents lawsuits / Contracts between customers and suppliers / Contracts posted on your own website / Contracts in simplified form (order and invoice) / Contracts with unfair terms / Unilateral termination vs unilateral termination / How we can help you
What a contract means
In society, whenever we speak of a contract, we mean a document drawn up in written form and bearing a specific name (e.g. contract of sale, framework contract for the delivery of goods, rental contract, donation contract, lease contract, etc.).
In reality, according to the law, a contract is understood to be an agreement of will between the parties on certain determined or determinable aspects (e.g. the sale of an asset, the purchase of raw materials, the donation of a dwelling, etc.) and not the drawing up of a written document.
What should be stressed is that, in general, the law does not make the existence of a contract conditional on the drafting of a document bearing such a name, but that it is sufficient for the parties to agree on certain aspects.
For example, whenever a person buys food from a market, a simplified sales contract is concluded between that person and the market on the spot (the shop’s offer to sell the products is followed by the customer’s acceptance of the offer when he or she brings the products to the cash register). In such cases, a sales contract is concluded between the parties, although the parties do not draw up a formal document called a sales contract.
The important thing is the agreement of the parties (the market agrees to sell and the customer agrees to buy).
Another example is the refuelling. The petrol station offers the characteristic products for sale and the customers by refuelling agree to purchase the products, in which case a sales contract is concluded between the parties.
In practice, there are also situations where the parties draw up documents called a …. contract (sale, donation, etc.).
In certain situations, the law requires that the contract be concluded only in a certain form (e.g. conclusion of a contract before a notary public).
A well-crafted contract prevents lawsuits
A well-crafted contract, which regulates the rights and obligations of the parties in a detailed and transparent manner, is a guarantee against subsequent lawsuits between the parties.
To the extent that the rights and obligations of the parties are set out clearly, unequivocally and in a way that is understood by the parties, the chances of the parties going to court are considerably reduced, as it is sufficient for the parties to read the content of the contract to see where they stand, what they can and cannot do.
Avoiding lawsuits also avoids the allocation of often considerable sums of money (court fees, legal fees, foreclosure costs, etc.).
For more information on creditor/debtor relationships please visit the section Creditor/debtor relationships.
Customer and supplier framework contracts
The world of commerce and traders is a dynamic and extraordinarily fast-paced world, which is why traders rarely have the opportunity to wait for proper contracts to be drawn up by lawyers.
Each type of business has a number of particularities, both technical and economic (e.g. the way production lines operate, the way raw materials are supplied, the time allowed for product testing, technological, cost and human limitations, etc.), which is why drawing up a contract in the commercial world from scratch each time or, where appropriate, using general contracts that are not properly adapted to the relevant type of business is time-consuming and often represents a hindrance to carrying out commercial activity with the desired speed.
One way for traders to optimise contract negotiation times is to draw up predefined framework contracts for both customers and suppliers, which are consistently tailored to the specifics of the business.
The advantages of framework contracts are manifold (e.g. they capture exactly what the business needs, they provide remedies for situations that may arise in practice, changes to them can be negotiated quickly by the person who drafted them, etc.).
For more information on how to oblige the debtor to fulfil its obligations, please go to the section Enforcement.
Contracts posted on own website
In an increasingly dynamic world, there is also an opportunity to increase transparency and reduce negotiation times by using electronic means.
A good practice in this respect is to post the contractual terms and conditions directly on the company’s website, so that any customer and/or supplier wishing to enter into a business relationship can check in advance whether or not the conditions are acceptable.
In this respect, traders may conclude contracts in an ultra-simplified form in the sense that they agree to the conclusion of the contract under the conditions existing on the website (e.g. this is the case of invoices issued by traders which include statements to the effect that the relationship between the parties is governed by the general terms and conditions existing on the website).
Contracts in simplified form (order and invoice)
In very many situations in dealing with suppliers and/or customers companies use contracts in simplified form consisting of a few summary documents (e.g. request for quotation, offer, order, order acceptance, invoice).
The advantage of such contracts is their speed and simplicity.
The disadvantage of such contracts is that they do not regulate a number of issues that may arise in practice and may lead to misunderstandings and/or disputes between the parties.
Contracts with unfair terms
In B2P relationships (companies vs. individuals), companies should pay particular attention to avoiding the use of unfair terms in contracts.
Unfair terms are those terms which, even if they are provided for in the contract and even if they have been accepted by individuals, due to the fact that they violate the law, do not produce any legal effects (as if they did not exist).
There must be a contractual balance between the parties in accordance with the requirements of good faith, and companies must not be given an advantage in a way that may prejudice the rights and freedoms of individuals (consumers).
Unilateral termination vs unilateral denunciation
Careful attention should be paid to the terminology used, especially as regards the ways in which a contract can be terminated.
The ways in which a contract can be terminated include termination and unilateral termination.
Termination can occur when one of the parties culpably fails to fulfil its obligations, and is a real sanction.
Termination can occur whenever one of the parties wishes to withdraw from the contract and operates even if the other party has fulfilled its obligations irreproachably.
In practice, in some contracts, the parties speak of termination, but in reality they want to speak of denunciation, in which case the contracts are drafted in an inappropriate form, not representing the true will of the parties.
How we can help you
Our team of lawyers can provide you with legal advice on any type of contract, particularly in relation to contracts with clients and/or suppliers.
The services offered consist of many different activities:
- discussions to fully understand the production flow;
- discussions to understand cash flow;
- drafting customer and supplier framework contracts according to the specifics of your company’s business;
- analysing and negotiating contracts proposed by third parties;
- advice on the effects of each individual contract clause;
- advice on the types of contracts you should use.