Overview Of Contracts

1. Details in the Contract Each contract will be different and will depend on the type of service offered. But there will usually be common terms and conditions, or clauses used in most contracts for services. These should include: • The names and addresses of both service provider and the customer. • The type of service provided. • The contractor’s status, whether working for an outside agency or not. • Payment terms and frequency of payment. • Limitation of liability. • Details on breach of contract. • The date of commencement of the services. • Renewal of contracts. • Termination of contract.

Changes to Terms and Conditions A contract or agreement cannot have changes made to the original contract. If a service provider wishes to make a change to a contract then it can only be undertaken with the agreement of both parties. This should only be an amendment to the contract and not a change to the original terms and conditions of the agreement. A service provider may wish they had placed certain terms and conditions into a contract but once the contract has been signed and agreed then the original terms will stand. Disputes and Breaches of Contract Disputes can arise over the terms and conditions of a contract and if any of the terms are broken then this will be seen as a breach of contract. Breach of contract can be taken very seriously especially if there is financial loss involved. The matter can be taken to the legal courts, and it is in the best interest of both parties to seek legal advice if court action is considered. The original contract will be used in court as proof if any breach of contract occurs. A service contract between the service provider and the customer is the best way to detail exactly what is expected from both parties. Contracts are legally binding documents and can be enforced in a court of law if a dispute does occur. It is a wise move for any service provider to take legal advice when drafting any form of contract for services. Similarly, a customer should always read the terms and conditions of any contract before signing on the dotted line. 2. How to Interpret a Contract A contract is an agreement between parties that sets out their respective rights and obligations for the period that the agreement is in existence. There are certain elements that all contracts should have in order to be valid and legally binding. However, not all contracts are in writing and under English law there are a variety of contracts that can be made without being reduced to writing (for example, buying a newspaper from a stand outside a station.) Reading a legal document can be daunting but there are certain elements which are required to make a contract legally binding.

Intention To Form A Legal Relationship This should be obvious in most contracts. There should be at least two parties, both of whom are capable of entering into a legally binding situation (e.g. a party cannot be a minor or certified insane.) Consideration This is in essence the distinguishing feature between a deed and a contract. In an agreement with two parties, both must provide ‘consideration’. In other words, both must contribute something within the contract. Sometimes, consideration can be nominal (e.g. a business which has considerable debts may be sold for the nominal value of £1). Offer And Acceptance In general, a contractual relationship will not have been formed unless there has been a offer specified by one party that has been accepted by the other. Partial acceptance is not sufficient, and will usually constitute a counter offer. Any counter offers will need to be agreed before the contract can be formed. Certain Terms And Complete Agreement Any ambiguity in the important terms of a contract is likely to make it unenforceable. For example, you cannot agree a contract of sale if there is no clearly defined price. There should also not be any question that either party has been forced or pressured into making the contract, and the subject matter of the contract should not be illegal. For example, if A contracts with B to commit a criminal act, this is not legally binding. What To Look For There are certain questions you should ask yourself when reading through a contract. Look through the rights and obligations of both parties. Is everything that you have agreed included, and is there anything that you didn’t agree to? Is the price, or other ‘consideration’ clearly spelt out? You must be able to establish the conditions for ending the contract too. Is there a notice period for terminating the contract? Does notice have to be given in writing? What happens if one party breaches the contract? Are there any clauses that look like a party is trying to avoid being liable for something? What are the procedures in case of a dispute? This can be important in relation to jurisdiction. If a dispute needs to be resolved in the courts, it will be much more expensive to sue abroad than if the agreement is governed by UK law. Make sure that you understand everything that is required of you before you sign.

3. Contract Clauses Explained

Contract clauses are a list of terms and conditions placed in a contract that govern liabilities and obligations. In most cases the contract clauses will include issues such as statutory rights, implied terms, and the expectations and responsibilities of both parties.

Always Read the Small Print When the time comes to sign a contract, whether it is a consumer credit contract or commercial builder's agreement it is vital to check the small print found in contract clauses. Some contracts can seem long winded and can be sprinkled throughout with Latin phrases and legal terminology, but they do need to be read thoroughly before any signature is granted. Contract clauses are usually small statements placed within the contract, but in some cases entire contract clauses can be placed within a contract. These clauses can work to the detriment of other statements made within the contract and can be used to limit any liability or obligation on the part of the person offering a service. Examples of Clauses In many contracts there are clauses known as penalty clauses. These clauses are designed so that when a party breaches a contract a financial penalty can be applied. One of the main reasons behind this type of clause is that if a contract is breached then the non breaching party will be able to claim a financial penalty without taking the dispute to court. With common consumer credit contracts you will often find contract clauses stating terms such as financial penalties for early repayments of loans. There can be clauses stating how much APR will be accrued for missed or late payments and clauses on fees and charges. Other Contract Clauses There are literally thousands of different clauses that can be applied and most are dependant on the type of contract. Many are placed in contracts after legal advice but many can be placed in a contract at the discretion of the person drafting the contract. There have been many cases of artist, musicians and writers signing away their rights to their own works simply by signing a contract without reading all of the small print. It is simply not enough to skim over the clauses in a contract, they should be read fully, and legal advice should always be sought for contracts that include the exchange of large amounts of money. Unfair Terms and Conditions Clauses can be placed into a contract that will basically give the provider of the service the right to apply and change certain requirements and obligations. However, this does not mean that the party offering the service has the right to do this. If a contract has terms and conditions that represent a large imbalance in favour of the person who is making the offer then this can be seen as an unfair contract. If a dispute did arise and the matter was taken to court then the judge could make a decision of an unfair contract based on the contract clauses alone. Clauses in Plain English There are some contracts that will include clauses that are close to unreadable. There will be complicated legal phrases included and statements and terms that are hard to understand. According to the Unfair Terms in Consumer Contracts Regulations (UTCCR) clauses must be expressed in a clear, intelligible language and in plain English. These terms can be deemed unfair and can be challenged if the person who signed the contract could not understand the meaning of the terms and conditions.

Illegal Contracts Simply taking the time to read the small print and clauses contained within a contract should alert you to the fact that it is either illegal or unfair. For example, an employment contract that does not include statutory rights may be deemed illegal. The employee's statutory rights are a legal requirement, and they should either be written into a contract or held in another place within a company. If an employer refuses an employee the right to see that their statutory rights are held somewhere then this can be illegal and legal advice should be sought. There is really no excuse for not taking the time to read a contract fully, including all contract clauses. Reading contract clauses and understanding them may stop the acceptor of the offer entering into an iron clad contract that they may regret at some later point. If there is any doubt over the meaning of any clauses then legal advice should be sought and no signature should be granted until clarification has been made.

4. Boilerplate Clauses Boilerplate clauses are typical clauses that are contained in the latter part of a contractual agreement. Not all boilerplate clauses are appropriate for all types of agreements and it is important that the person who drafts the contract has a good understanding of the clause’s usage. The most commonly used boilerplate clauses are discussed below, along with an explanation of their purpose. Amendment An amendment clause provides the means by which the parties are entitled to make changes to the contract. Assignment This is a term used to refer to the rights and obligations of a party to a contract and the ability or not of that party to pass on those rights and obligations to a 3rd party. Often contracts have a ‘no-assignment’ clause, which prevents either party ‘sub-contracting’ their duties under the contract. Arbitration The purpose of arbitration is to provide an alternative to litigation. It is generally quicker, cheaper and is less formal than going to court. Arbitration can be particularly useful in resolving disputes that are of a highly sensitive or confidential nature. Often a contract will have an arbitration clause so that a dispute will be resolved by an impartial tribunal without either party having to resort to costly and lengthy litigation. Contracts (Rights of Third Parties) Act 1999 This statute allows a third party (i.e. a person who is not a party to the contract) to enforce a term of the contract in two situations: firstly if the contract expresses this ability, or secondly if it is apparent that the contract gives him some kind of benefit. In practice, many contracts seek to exclude third parties from claiming that they have rights under the contract or in the alternative, list the parties who do have recognised rights under the contract.

Entire Agreement This is a very useful clause that has the effect of limiting all the parties’ rights and obligations to only the provisions contained within the contract and any attached schedules. This means that neither party can claim to have acted based on any statement, discussion or document not expressly contained within the contract. Force Majeure Force Majeure is a clause which prevents the parties to a contract from being liable in the event that circumstances outside their control stop them from being able to undertake their obligations under the contract. The theory behind this lies in the legal doctrine of ‘frustration’ – that parties should not be penalised for the actions or fault of another and which they could not reasonably have foreseen. Interpretation This clause provides certain meanings for elements of the contract, e.g. if a statute is referred to in the contract and it is later amended the contract shall be deemed to be referring to the amended legislation. In addition, he, she or they can be agreed to be ‘they’ to avoid repetition and the untidiness of ‘he and/or she and/or they’. Law And Jurisdiction This determines the law of the country (or state) that governs the contract. In the event of litigation the jurisdiction is the country that will hear any legal dispute. Notices This provides the parties to a contract with an agreed method of communication upon the occurrence of specific events. It is a very important provision as it sets out the way in which parties should communicate, and the timescales, thereby avoiding dispute later on. If parties are in different countries, this is likely to be by electronic means. Set Off This is generally a clause that prevents one party from deducting money owed from money payable to the other party, in other words giving themselves a ‘self-awarded discount’. This means that if a seller owes a purchaser money, for whatever reason, the purchaser cannot deduct this from money that is used to pay the seller the purchase price under the contract. Severance And Invalidity If a clause to a contract is found to be invalid, illegal or otherwise unenforceable, this clause allows the parties to remove the clause/words and continue performing under the contract. However there are limits–if removal of the illegal or invalid clause makes the contract unworkable, the contract will be void. Termination This sets out the ways in which the contractual relationship can come to an end. This may be at the end of a fixed term, if the contract is breached by either party, by

granting the other party notice of termination (e.g. 30 days notice and in writing) if one party becomes insolvent, bankrupt or is liquidated, or a dispute arises between them that stops them from being able to continue with the contract. There will often be a further section in this clause which explains what happens when the contract is terminated.

5. Legal Terminology or Jargon in Contracts

Nowadays more and more lawyers use plain English in contracts, although there are some who still insist on using legalese. At worst this can mean that some contracts are impossible for non-lawyers to read, and is not helped by the fact that the law uses a number of Latin terms. These two elements can make reading contracts a baffling experience for the rest of us! Below are some of the most commonly used legal words and phrases and their explanations: Best Endeavours Contracts will often bind one or more parties to using ‘reasonable’ or ‘best’ endeavours to do something. There is no solid definition as to what this actually means, and lawyers have argued whether there is in fact a distinction between ‘reasonable’ and ‘best’ in this context. Broadly speaking, however, it places a burden on a party to a contract to ‘try their best’, or do all that can reasonably be expected of them in the circumstances. Bona Fide Bona fide literally means ‘in good faith’. In the context of agreements, this is used to describe the intentions of the parties. In other words, a ‘bona fide agreement’ is one which is entered into honestly and without an intention to defraud. The opposite of ‘bona fide’ is ‘mala fides’ which means ‘in bad faith.’ Dissolution This refers to the act of bringing an agreement to an end. If an agreement is dissolved, either between the parties or by a court, both parties will be restored to their original positions (as they were before they entered into the contract.) This term is also used in relation to marriages and corporate partnerships, amongst other things. Force Majeure This provides a ‘get out clause’ for parties to a contract in the event that an unforeseen event, that was not within their control, prevents them from carrying out their obligations under the contract. Implied Terms These are terms that form part of the contract even though they are not expressly included in the text of the contract. Perhaps the most common are those provided in contracts for the sale and/or supply of goods. As an example: if A sells merchandise to B, B would be entitled to assume that A had the legal right to sell him the merchandise – even though this right may not be explicitly spelt out on the contract.

Infringement This relates to trademarks, which are a form of intellectual property. A trademark is infringed if an unauthorised person has used it, or a very similar trademark, for their own gain. Inter alia This is a latin term that means ‘amongst other things.’ For example, the judge went on to say, inter alia, that the contract was unenforceable. Passing Off This is a tort in common law that protects the rights of someone who has an unregistered trademark. For example, if Y misleads members of the public into thinking that they are dealing with X trader (when in fact it is Y) in order for Y to make a profit for themselves, X will sue under this tort. Preamble A preamble is found at the start of a commercial agreement. There should be no legally binding terms in this part of the contract. It is simply used to provide an introduction by way of background to the agreement, or the nature of the parties to the contract (e.g. X is a manufacturer of goods supplying to Y, a seller of goods.) Privity Of Contract This rule forbids third parties from being able to sue or be sued under a contract to which they are not a signatory. It means that only the parties to a contract can sue or be sued under it. Recitals The recitals are very similar to the preamble and are situated at the beginning of the contract. The recitals often start with the word ‘Whereas’ and are also known as the ‘whereas clauses.’ This part of the contract should not contain rights or obligations of the parties, but is merely there to explain or introduce the nature of or background to the contractual relationship. Restrictive Covenant A restrictive covenant is most often seen in contracts relating to land and employment contracts. In the case of land, it restricts the land from being used or developed in certain ways. In the case of employment contracts, it restricts an employee from doing certain things at the end of his or her employment. This may include not competing with their former employer, not dealing with former clients, not ‘poaching’ former colleagues and not using the former employer’s confidential information for any purpose. Undertaking An undertaking is a promise to do, or not to do, something. It is commonly used between lawyers to prove their good intentions. For example, if an original document needed to be served by 4pm, a solicitor could fax it and provide an undertaking that the

original would be posted first class that evening.

6. What To Do When a Contract is Breached A breach of contract is defined as a failure by one party to perform its obligations as required under a contract. The requirement to perform may be expressly incorporated into the contract, whether in writing or orally, or may be implied by common law or by statute law. If a breach of contract is suffered by one party, they should be able to claim damages as long as the damages are proven. A breach of contract may be a breach of warranty, an intermediate breach of contract or a breach of condition. People enter into contractual situations with the best of intentions but for all manner of reasons the terms of the contract can be broken. A breach of contract can be major, minor, intentional, accidental, capable or incapable of remedy. Contract terms can be broken as a result of an event or occurrence that was outside both parties’ control. So what happens when a contract is breached? Is the Contract Verbal or Written Down? If the contract is verbal, you should write to the breaching party informing them of the fact that they have breached the contract and stating the timescale within which you would like the breach put right. If the Contract is in Writing, Does it Specify What to do in the Event of a Breach? A lot of contracts will have clauses in them that dictate what the parties should do in the event of a breach of contract. There may also be classifications for what constitutes a ‘major’ or ‘minor’ breach of contract. Therefore the first thing to do if you consider that there has been a breach is check whether there are any such provisions. In most commercial agreements, the applicable section is called ‘breach of this agreement’ or ‘breach and termination’ or ‘procedure in the event of breach of contract.’ Is There a ‘Notices’ Section in the Contract? You should then inform the breaching party that they have breached the contract. The way in which this should be communicated may be contained in the ‘Notices’ section of the contract. In the absence of any such section or specific requirement for a particular method of communication, it is always advisable to communicate the breach to the breaching party in writing. What is the Nature of the Breach? Depending on the nature of the breach of contract, it may be that the contract will simply be allowed to continue as usual. For example, if you have a contract with a broadband service provider and your service is interrupted for a few days, there is likely already to be a provision in the service agreement that allows for service interruptions which means that this will not make the contract void. Are You Asking for Damages? In some situations it will merely be a matter of notifying the breaching party who will then either admit or deny the breach. If the breach is admitted, damages may be

payable to the aggrieved party. If the breach is denied, it may be appropriate to go to mediation or arbitration, if the issue cannot be settled amicably. Was it the Other Party’s Fault? Force Majeure is a contract law term that, simply put, provides a ‘get out clause’ for parties to a contract in the event that the contract is breached because of something out of their reasonable control. If this is a specific clause in the contract, then ‘force majeure’ will apply. In its most basic terms, force majeure seeks to exclude acts of terrorism, war, strikes, lockouts, floods, acts of God etc from being seen to be the fault of a party to a contract. Contracts sometimes contain a further clause that stipulates the timeframe within which one party should inform the other of the force majeure event, and the means by which they should do this. In the case of a genuine force majeure event, neither party will be liable for the failure of the other to perform under the contract. If a contract does not contain a ‘force majeure’ clause, or if the contract is agreed orally, an event that is outside either party’s control may ‘frustrate’ the contract under the legal doctrine of ‘Frustration.’ Again, neither party will be liable for breaches which occur otherwise than within their reasonable control.

7. Making Your Own Contracts Many people would find the idea of drafting their own contracts very daunting. The assumption for some is that legal expertise and contract law knowledge would be needed before attempting this task. But legal expertise is not always necessary when making your own contracts, although it is vital in some cases. As long as you follow some simple guidelines it is quite easy to set out your own contract. Binding Contracts The fundamental basis of a contract is offer and acceptance. When one party makes an offer and the other accepts they are basically entering into a legally binding contract. But the contract will not be deemed complete until all the terms and conditions have been laid out. This does not necessarily have to be done in writing; a verbal contract can still stand as legally binding, but it is a wise move to have some form of written contract. Terms and Conditions The terms and conditions of a contract are a very important aspect of the binding agreement. If a breach of contract were to occur and a dispute was brought before a court, a judge would look into the terms of the contract very carefully. All the terms and conditions must be laid out carefully before the contract can be deemed legally binding. These terms must not be ambiguous or vague; they must be clearly understood and accepted by both parties. The terms and conditions must also be complete, which means that no further terms and conditions are to be added to the contract at a later date. There can be changes to a contract at a future date, such as employers changing job specifications for an employee, but the original terms and conditions must stand. Contract Types It is very wise to have a written contract when dealing with any form of financial service. Contracts will vary and some may be more complicated than others; this will be when

legal advice will be needed. For example, an employer who is hiring an overseas employee will need formal paperwork and contracts, which may be the job of the human resources department. Some contracts can be very simple and will state some basic business particulars, the offer, acceptance, timescale and the remuneration. Some contracts can simply be verbal agreements between two people, and verbal agreements can be classed as legally binding. Having a written contract does make sense, especially where money is involved, in case of any later disputes over a breach of contract. Downloadable Contracts If you are looking for a basic contract without any legal expertise involved then it may be a good idea to check the Internet. In a lot cases you can simply type in the type contract you need into an Internet search engine and you will be able to download a basic contract. Some of the contract providers will charge you for the templates and there is no guarantee that these contracts have been made with any form of legal input. Remember there are some cases where legal contracts are needed such as the sale of property and tenancy agreement;, solicitors will be needed to draft these contracts. Contract Checklists If you are considering drafting your own written contract then careful consideration over the contract components will be needed. Items that should be included in any contract will be dependant on the type of contract but will usually include: • The name and address of both parties. • Offer and acceptance. • Time schedule. • Specification of services. • Fees. • Terms and conditions of the project. • Dates and signatures of both parties. • Liability clause. • Breach of contract clause. If you are making your own contracts the main aim is to make sure that all of the terms and conditions are clearly laid out. Both parties must not be under any misunderstandings as to their responsibilities and expectations. A written contract can save a lot of time if any dispute arises as it can then be referred to at a later date. Written contracts are a wise idea regardless of whether you are making your own contracts or employing a legal expert to make them for you. They serve as set rules of expectation for the parties involved in an agreement. If there is a written contract then it is much easier for a dispute to be settled should one arise, or if the matter is taken to the legal courts.

8.Patents & The Law A patent is used to protect new inventions with the purpose of allowing the creator of the invention to have the legal right to decide who can and cannot make, import, or sell the invention without their permission. Patents also cover how new inventions function, how they work and what they are made of.

Stipulations for Patents There are stipulations required in order for an invention to be patented. The invention must be original and be capable of being used or produced in some form of industry. There is no actual requirement for an invention to be patented but if the invention does go on sale or the invention is made public then it will be too late to obtain a patent. It makes sense to obtain a patent in order to stop other people from copying your invention. Patents and the Law One of the requirements for patent rights is that the inventor does need to give full disclosure of the invention. Details of the patent are then disclosed in patent libraries. A UK patent only maintains rights for the invention in the UK; that is to sell, import, manufacture and use the invention within the UK. International patent rights can be applied for within 12 months of filing the original patent application. Once the patent has been granted it will then be the duty of the holder of the patent rights to stop infringement of the patent from others. Timescale of Patents In Britain patent rights last for 20 years from the date the patent application was filed. During the 20 years the patent will need to be renewed and renewal fees will be applicable. If the patent lapses through non payment of renewal fees or the 20 year timescale expires then the patent rights will also expire and the invention can then be exploited by anyone. However, there may be other intellectual property rights attached to the invention that will stop invention exploitation by others. Patent Agents Although it is not required many inventors will use patent agents in much the same way that authors use literary agents. Patent agents will be able to give advice on the best way of commercialising the invention and deal with applications and negotiations with the patent office. They will also be knowledgeable on the best way to protect the invention and the inventor’s rights outside of the normal patent route. Patent Fees There is no fee for a patent application but it will cost around £200 in fees in order to obtain a patent grant. If the patent is granted there will also be renewal fees to pay, and if you hire a patent agent then his or her fees will also need to be paid. Patent Infringement Patent infringement is taken very seriously and hefty fines have been applied by the law for infringement. Cases of infringement of patent rights have been found in very large and very well known companies and the financial penalties imposed have ranked at the millions of pounds level. Inventors who are applying for patent rights will need to check with the patents database in order to make sure that they are not infringing on anyone else’s patent rights. Patent law has been set in place to both protect the rights of the inventor in much the same way that copyright exists for authors, musicians and artists. Gaining a patent for an invention is not an easy process and in some cases it can take a few years, but it is

the sensible approach to take in order to prevent other from exploiting what could be years of hard work.

9. Copyright & The Law If you have spent anytime studying media at university or college then the topic of copyright and the law is bound to crop up. Copyright laws were set down in order to prevent others from exploiting original material without paying the creator of the material. Copyright issues have been the focus of much media attention recently due to the many cases of copyright theft via the internet. Once material such as books, works of art or music have been created they are automatically protected by copyright. In the UK no formal registration of copyright is needed, although it would be wise to put written copyright protection in place. Copyright laws exist in order to protect the creator of the work. It allows the creator to have control over his or her creative works including permitting or prohibiting the use of their works in other areas. Materials Protected by Copyright There are certain materials that have been set out in law as being protected by copyright. These will include: • Original dramatic, musical, and artistic works, literary works and computer programs. • Films, television and cable broadcasts, and sound recordings. • Typographical arrangements of published editions of works such as magazines. The creator of the original works can only claim copyright if the work is a result of independent effort. Even if two films were to appear that are almost identical, copyright cannot be claimed if the work was produced independently by each film maker. And although people have tried to claim copyright, you cannot claim copyright simply for having an idea. Length of Copyright Copyright and the law also sets out direct lengths of time that copyright will exist. For literary works, music, dramatic works and works of art the copyright will last for 70 years from the end of the year that the owner of the work died. For sound recordings or broadcasts the copyright will last for 50 years from when the owner died. For films the copyright will also be 70 years from when the director of the film died or from when the work was last made available to the public. Registering Copyright Unlike many other countries there is no formal copyright procedure needed in the UK. Copyright is automatic once the work has been created as long as it qualifies for copyright protection. There are of course extra precautions that can be taken by the creator to ensure against infringement of copyright and these can include marking © on the work followed with the name of the creator and the date. Infringement of Copyright Infringement will come about if another person uses original material without permission or payment to the creator of the work. If for example a third party were to take excerpts

from a book without the author’s permission and then publish the excerpts in a magazine then this would be infringement of copyright. There are some exceptions to infringement of copyright and these can include material that is used for educational purposes and used in libraries and public archives, and it can also include works placed permanently in public places. If work is used, for example an excerpt from a book, it may be a minor infringement but it will depend on whether the work has been previously published or the amount of material used. Copyright and the Internet The ease of copying and distributing material via the internet has been a subject of much media debate and a few court cases. Copyright and the laws contained within the Copyright, Designs and Patents Act of 1988 does extend to the use of material over the internet such as films, music and literary works. Many people have found themselves facing heavy fines for copying and distributing music and films over the internet without permission from the owner. Similarly this copyright does extend to computer programs and computer software. There are many cases of people copying computer operating programs onto discs and selling them illegally. They are illegal because they are breaking the copyright act. In cases such as these, copyright and the law will apply not only to those selling illegal copies but also to those buying and using the illegal copies.v

10. The Law & Verbal Agreements Many people are not aware that verbal agreements are in many cases as legally binding as written contracts. Verbal contracts can be upheld by a court if someone decides to breach the agreement, although without written terms and conditions it may be difficult to prove. Conditions of a Verbal Agreement Under law there are two basic terms that constitute a binding agreement. The verbal agreement will be binding if there was an agreement on the services to be performed and an agreement was reached on remuneration for this service. This agreement can be reached by a verbal exchange in person, via telephone or via an email. There are certain contracts and agreements that must be made in writing and these will include the sale of property, tenancy agreements, copyright transfer, and contracts for consumer credit. In some cases, verbal agreements will not be upheld in court, not because of the lack of a written agreement but because the terms of the verbal agreement were not clarified. Written Agreements For any agreement concerning an exchange of services it is a wise idea to have some form of contract or written statement. The contract or statement should include the terms and conditions of the agreement and is particularly helpful if a dispute between the parties occurs. Complete Verbal Agreements In order for a verbal agreement to be legally binding the agreement must have reached completeness. This means that all terms and conditions have been reached and agreed regarding services and terms of pay. Agreements will be incomplete when there are still

further terms and conditions to be agreed. Agreements in principle will not usually be upheld in court and will not usually be considered complete verbal agreements. Verbal Agreements and Disputes If either party has decided to break a contract then the matter can be taken to the legal courts. In most cases the dispute may rest on the justification of the terms of the verbal agreement. There are a few ways that a judge will try and establish the terms of the agreement. These could include investigating what actually happened in practice. This can include the services that were actually undertaken and if any money whatsoever was paid for any services. Enforcing a Verbal Agreement Apart from taking the matter to court there are other ways to enforce a verbal agreement. If money is owed then the matter can be passed on to a collection agency to try to enforce the matter for you. The disgruntled party can also apply pressure themselves by sending letter, emails and making telephone calls to the person who is in breach of contract. Copies of all emails and letters should be kept in case the matter does reach the law courts. Payment before Service One way of avoiding this sort of dispute ever occurring may be to ask for some form of payment before supplying a service. Although the customer may not always agree to this it may be an option to consider. In some cases if a person is going to breach a contract and withhold payment then the odds are they may never have intended to pay for the service in the first place. In many cases though a customer may not like the idea of paying for a service until the job is completed for fear of non completion. Threatening court action for breach of a verbal contract may not actually help the matter at all if one party intended not to carry through on the agreement. However the law does consider complete verbal agreements as legally binding and the matter can be brought to the law courts for a judge to make the final decision.

11. Service Agreements Professional service agreements are vital business tools that are used to clearly set out the expectations and requirements of both the person supplying the service and the customer. Problems can occur with the service provider/customer relationship if clearly defined service agreements and contracts are not set in place. The Need for Service Agreements Although verbal contracts are considered binding, the safe approach is to set out the terms and conditions of any service agreement in writing. In most cases the company providing the service will be the one making the offer and the customer will be the one to accept and remunerate the service provider. Service agreements are particularly helpful to the customer to ensure that they get the service they have paid for, on time and in full. If there are disputes over the agreed service then the contract can be used to clarify the dispute through reference to the terms and conditions.

Terms and Conditions The service provider will usually be the party who provides the contract and with it will come a list of terms and conditions. These terms and conditions, sometimes known as contract clauses, will clearly outline the requirements, expectations and obligations of both parties. Service agreements should be carefully read before any agreement is concluded. If any of the terms and conditions are unclear in the agreement then do not sign. It is a legal requirement for any clauses to be intelligible and easily understood by the customer. If any of the clauses are unclear then the contract may not be enforced in a court of law if a dispute arises. Service Providers Service providers come in all shapes and sizes. From the company that delivers milk to the doorstep to the energy supplier that provides electricity and gas to businesses and homes. There will be different levels of detail in each contract and different levels of leeway also provided. For instance, a company supplying products to another business may have to meet strict deadlines, and missed deadlines could cause a financial loss to the company who is paying for the service. Clauses in the service agreement may be set in place that outline a financial compensation requirement if the deadlines are missed and a breach of contract occurs. One of the most damaging aspects of this type of breach could be the loss of good faith and trust between service provider and customer. The Service Agreement Service agreements come in many different forms, and the detail that goes into an agreement may differ depending on the service provided. However, there are a few details that are commonly used within all service contracts. These will include: • The names and addresses of both parties. • Description of the services provided. • Definitions of terms used within the agreement. • Payment terms and frequency of payment. • The obligations of the provider and the client. • Confidentiality clauses. • Renewal clauses. • Signatures and witness signatures if needed. • The date. Customer Protection Consumers have a great amount of protection set in place when it comes to service agreements. There are numerous consumer laws that apply to a service provider on how they can and cannot act with customers. These laws are designed to protect the rights of consumers from unfair terms and conditions, and to protect the consumers from companies that act in bad faith. An unbalanced service agreement that is written in favour of the service provider may not be enforceable in a court of law. Service Providers without Contracts It is always wise to have a service agreement or contract in place. If a company is providing a service and does not offer a contract then the customer should request one. Doing this will give the customer basic consumer rights and there be a point of reference if disputes occur over the service provided. Customers should always be wary of service

providers, such as landlords, who do not offer contracts or agreements when offering a service. 12. Limited Liability Company Agreements

Limited liability companies have similar aspects to most businesses but they have been set up in a way that the member’s personal finances are protected. Personal responsibility for any debts incurred by the business is reduced or eliminated. As such there are certain rules and requirements that make up limited liability company agreements and contracts. Types of Limited Liability Companies In general there are three different versions of a limited liability company. These are public limited companies that must have at least two shareholders, with shares offered to the public. Private unlimited companies, which are usually created for certain purposes, and the more common private limited companies that can have one or more shareholders but cannot sell or offer shares to the public. The Formation of Limited Liability Companies The formation of a limited liability company is often performed by solicitors or company registration associates. However the shareholders who wish to form a limited company can apply directly to the Registrar of Companies and advice can be given from Companies House. Memorandum of Association This is the first document that must be dealt with when forming a limited liability company. There are a number of points that must be submitted in this document and they will include: • Company objectives. • The actual name of the company. • Where the company will be located. • The amount of capital that exists. • A stipulation that the member’s liability is limited. • That members will contribute to the company assets if the business fails or is terminated. • Whether or not the company will be a public company. Articles of Association The Articles of Association is the second limited liability company document that must be submitted to the Registrar of Companies. In this document information will be submitted on the rights of the shareholders, general meeting details, information on the payment of dividends, and the authorities granted to directors. There is also a section on whether or not shareholder can transfer any of the shares, and rules and regulations regarding the issue of any new shares.

Other Forms and Agreements As well as the Articles of Association and the Memorandum of Association there will be other documents that must be filled in and approved by the Registrar of Companies. These documents may include an Incorporation document if a limited liability partnership is to be formed. All of the documents that are sent to the Registrar of Companies will be thoroughly checked. Checks on the prospective company members will be made with the register of disqualified members and directors. Any discrepancies found may lead to a refusal of the formation of the limited liability company. Returns and Accounts Under company law all limited liability companies are required to file certain documents to the Registrar of Companies. These will include annual returns and annual accounts and these documents will be made available by the registrar for inspection by the public. Accounts must include profit and loss details, a company balance document, and an auditor and director’s report. The information included on annual returns will be the company’s registered office address and the names and addresses of the directors. All of the above documentation is legally required for the formation and running of a limited liability company. There may be other limited liability company agreements set out between members that designate the roles each member will play within the business. These agreements and contracts will state the actual terms and conditions of the business in case any disputes arise regarding the day to day running of the business. As with any business contract, legal expertise should be used when drafting and submitting any limited liability company agreements and contracts.