When drafting a tailormade contract, it is in the first place important to define who are the contracting parties. When more parties are involved this point is even more important. It seems an understatement, but a Chamber of Commerce check is not an unnecessary luxury. Moreover, correct statement of the (corporate) identity and the legal capacity of the persons who are signing the contract, is also crucial. Nevertheless it is important to understand the industry and the business of the contraccting parties.
The general tendency is to make contracts more and more extensive. The underlying idea is that an incomplete, or ambiguous contract is worth than not having a contract at all. This becomes clear when such a contract is submitted to the court (often a time consuming and costly procedure). If the judge cannot do anything with the text of the contract because it is unclear, the contract will not be taken into account and the judge will consider parties intention and takes a decision based on reasonableness and fairness.
An important fact before the contract negotiations starts is the preliminary contract” the so-called the Letter of Intention (LOI), Memorandum of Understanding (MOU) and the Non-Disclosure Agreement (NDA). What information should be in the above-mentioned agreements and what information should be in the final contract? Important is to find the balance between a good relationship with your future business partner(s) and establishing a clear business obligation. When a contract is drafted in too friendly, in a non-obligatory way, it becomes difficult to demonstrate the basic obligations and the final contract can be revoked. Normally, the LOI, MOU or NDA are integral parts of the contract. However, when and under what conditions this is the case, depends on several factors.
In a more advanced stage of negotiations it happens that one of the parties wants to stop the negotiations. At that point the question arises: Is it still possible/ aloud to stop negotiating without having to pay a pennalty to the other party? Parties may have become to a stage that the other party is convinced and has the right to be convinced that the contract will be signed. Even more the company may have anticipated on it or made extra costs and/or investments. Then it is important to determine how to minimize damage for the party who stopped the negotiations or to maximize the fee wich has to be paid to the party who suffered of the interrupted negotiations. In the Netherlands is a lot of jurisprudence about the stopped negotiations and the ‘’three stages” which can be distinguish.
Rechta Advocatuur can advise you in the abovementioned situations and all other situations, related to contract law and also to applicable law and jurisdictions. Rechta Advocatuur can also do a quick scan of the existing contract, and to ad absolutely necessary articles to your contract for the tough moments in your business relationship. Rechta Advocatuur is an expert in this area because of the experience in court: having seen when it went wrong helps you prevent.
More information about: The special agreements, Cross-border contracts, General Terms and Conditions, Breach or Termination of a contract and Liability will be soon available on this part of the website. (In Dutch it is available already).