As a business owner, you will enter into contracts with other parties regularly in the course of running your business. However, not all contracts are legally enforceable under New Zealand contract law. They generally have to meet specific criteria to be enforced. Even when you do not have a written or signed agreement, like in a handshake deal situation, you may still be bound by its terms, as long as it meets the right criteria. Commercial contracts can have a varying degree of complexity, from a standard sale of consumer goods to a complicated construction contract. A contract or commercial lawyer can help you with drafting and reviewing your legal agreements to ensure that they are robust and minimise the risks for your organisation. They can also represent you in contract disputes. This article lists five things to discuss with your contracts lawyer. 

What Do Contract Lawyers Do?

A contracts lawyer can assist you with drafting or reviewing a wide range of contracts, including:

  • shareholders agreements;
  • franchise agreements;
  • sale of business agreements;
  • confidentiality agreements;
  • joint venture and partnership agreements;
  • loan agreements;
  • service and consultancy agreements;
  • employment and contractor agreements;
  • distribution and supply agreements; and
  • licence agreements.

They can also represent you in a contractual dispute with another party. If you have any contract-related questions, like the ones listed below, you should seek legal advice. 

1. Is Your Contract Binding and Enforceable?

A contract is binding when it meets all of these elements: 

  • offer and acceptance;
  • consideration; and 
  • intention to create legal relations. 

However, this does not mean that you can enforce it on the other party. For your contract to be enforceable, its terms have to be certain. A court cannot enforce an agreement with uncertain terms. Some specific types of contracts may have other requirements set out in particular legislation. For example, contracts concerning land have to be in writing. 

There are also issues concerning “capacity” to enter into a contract. For example, the parties have to be over a certain age and of sound mind. 

Your contract lawyer can assist you in:

  • drafting or reviewing your contracts to ensure they are enforceable (do not contain uncertain terms); or 
  • a dispute relating to the enforcement of a binding agreement.

2. Your Contracts Lawyer Can Advice What Happens if You Breach Your Contract 

If you breach your contract (by not fulfilling your obligations or taking steps to prevent an obligation from being fulfilled), the other party may be entitled to receive damages. Damages for breach of contract include, in most cases, financial compensation to put you in the position that you would have been had the contract not been breached. For example, if you are late delivering goods under a contract, the cost of hiring replacement goods for the period you are late. 

In cases of a serious breach or breach of essential terms, the other party may be able to cancel the contract. 

3. Does Your Contract Need to Be Signed? 

Generally, you enter into a contract when it meets the three essential conditions we discussed earlier. It does not matter if the contract is in writing or you have signed it. However, with some specific types of contracts, you may be required by law to sign them in writing, such as land contracts. In other cases, the actual terms of the agreement may enforce these or other requirements before it is valid and therefore binding. 

4. Your Contracts Lawyer Can Help You Transfer a Service Agreement to Someone Else

A service agreement is a type of contract that outlines your relationship with a customer to whom you will provide services. However, in some instances, such as the sale of your business, you may need to transfer your service agreements to another business. 

In these circumstances, you can either:

  • transfer specific rights under the agreement, such as the right to payment, by choosing to assign the contract;
  • transfer the whole agreement to someone else, by choosing to novate the contract; or
  • delegate some of the work to someone else while you remain responsible to the customer, by choosing to subcontract. 

Your best course of action will depend on your circumstances. For example, if you sell your business, it is best to novate the whole service agreement to the new business owner, because they will now be providing the services to the customer instead of you. Therefore, they must receive the relevant payment for these services and should be taking on your future rights and obligations. 

Your contracts lawyer can help you transfer your service agreement, draft a deed of novation or create a subcontractor agreement. 

5. Your Contracts Lawyer Can Advice If You Can Get Out of Your Contract

You can get out of your contract if: 

  • the contract is not valid, binding or enforceable;
  • you are entitled to cancel the contract because of another party’s breach or misrepresentation; or 
  • the contract permits you to cancel in certain circumstances, and those circumstances are met. 

If you think you are in any of these situations, you should discuss your options with your contract lawyer to avoid wrongly cancelling the contract. 

Key Takeaways 

If you run a business, it is a good idea to develop a good relationship with a contract lawyer, as you will often need to outsource matters, such as: 

  • drafting or reviewing a wide range of contracts;
  • assessing whether your contract is binding or enforceable;
  • understanding the consequences of breaching a specific contract or dealing with these if it is too late; 
  • transferring your service agreement to another party; 
  • assessing whether you can pull out of a contract; and 
  • representing you in a legal dispute related to any of the above. 

If you need help with any of these matters, LegalVision’s contract lawyers can help. Call 0800 005 570 or fill out the form on this page.

FAQs

How much does it cost for a lawyer to review a contract?

This depends on the complexity of the contract, whether specialist knowledge is required, such as an industry code or regulation and the lawyer’s experience. Some lawyers can charge between $500 to $2000 to review a contract.

What kind of lawyer handles breach of contract?

If you want to assess if you have breached a contract or to deal with the consequences of the breach, you can hire a contract or disputes lawyer.

How do you handle a breach of contract?

If you are the innocent party, you have an obligation to mitigate any damage. You could do this by affirming the contract (treat it as continuing). If the other party still does not fulfil their obligations, you can claim damages from the breach, or you may have a right to cancel the contract if the breach causes an onerous or costly burden on you.

Who is liable for the breach of a contract?

If you enter into a contract with another party and do not fulfil your obligations under the contract, or you take steps to prevent an obligation from being fulfilled, you may be liable for a breach of contract, and therefore, may need to compensate the other party.

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