Reading time: 5 minutes

Any business needs to use contracts for their business transactions. This is especially true for businesses that deal with other entities, such as a catering business. If you have a catering business, you will need to use a contract to ensure your agreements with other businesses are legally enforceable. However, the contract must include specific terms, so that the courts can grant compensation if either party breaches their obligations under the contract. This article will show you the three key clauses you should include in your catering contract to protect you.

What Is a Catering Contract?

A catering contract is any contract that a catering company has with its clients. This agreement will stipulate each party’s rights and obligations and the specific terms that the transaction must follow. As with any contract, there are various types of agreements that a catering company can utilise. 

Types of Catering Contracts 

Cost Plus Model

A cost-plus model is a type of contract that allows the brunt of the cost to be pushed onto your client. A cost-plus model contract allows this to happen as you do not set a ceiling on your operational costs. Therefore if your budget blows out during a catering function, you can pass these costs to your client. However, be warned that this must be fair and reasonable as your client could refuse to pay if the costs are too high.

Fixed Price

This type of contract requires you to set a price for your services. This means that if your costs are higher than expected, you are required to pay for this. You cannot ask your client to cover these costs. The advantage of this type of contract is that you might attract more sales as your customers know you will only charge what you wrote in the contract. However, if a function blows the budget, you will be stuck to foot the bill. 

Lost Performance Guarantee

Another type of contract that is common amongst the catering industry is a performance guarantee contract. This allows a third party to guarantee the work that is completed for you. Most commonly seen from contractors, a performance guarantee essentially does what the name suggests: it guarantees performance. When a third party such as a bank or insurance company guarantees the contract, the work is more likely to be done to a higher standard. Essentially a performance guarantee acts as a type of bond.

Key Clauses

Terms of the Contract

The first of the key clauses in your catering contract is the terms. These outline the names of the parties and will date the contract. The reason why the terms are so important is that they make the contract certain. A certain contract is crucial as it is a requirement of a binding contract. If the terms of the contracts are ambiguous, then the contract may not be held up in court. When naming people in a contract, make sure to use full names to avoid any confusion or dispute that may arise.

No Oral Variations Clause

Some contracts may include a no oral variations clause. A no oral variations clause means that you cannot alter the contract verbally. This is a necessary clause to include as you do not want to accidentally agree to something you do not want. Sometimes, parties may get carried away when discussing the contract and regret their actions later on. A no oral variations clause stops this from happening. However, the court can still overrule a no oral variations clause if both parties had intended for the clauses to be displaced. If this happens, you can use oral variations.

Termination Clause

Finally, you should always include a termination clause in any contract. A termination clause allows the agreement to be cancelled in certain situations. These situations are usually where either party breaches the contract. You can expand these parameters by allowing the contract to be overturned if another opportunity comes up for either party. You should only activate termination clauses if you are sure that the conditions have been met. If you terminate the contract prematurely, you could have repudiated the contract, which means you may be liable for damages.

Key Takeaways

Catering contracts need to have all the elements of a binding contract to be legally enforceable in court. There are different ways that catering companies can structure their contracts and each of these provides a unique set of advantages and disadvantages. In particular, catering companies should consider is including key clauses in the catering contract, as provided above, to protect you from difficult contracting partners and will allow you a way out of a challenging relationship.

If you need any legal assistance with oral terms, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I change the price on a fixed price contract?

No, once you have signed the contract, the price of the service you are providing cannot be changed.

Who can activate the termination clause?

Either party can activate the termination clause as long as the conditions in the contract are met.

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards