Commercial contracts are legally binding agreements between two or more parties. The contracts usually stipulate the expected behavior between these parties in a commercial setting. This includes their obligations as well as the things they are prohibited to do depending on their position in the organization.
Most commercial contracts are usually in written form. However, the law also recognizes other types of commercial contracts including verbal or implied ones. All aspects of business including wage policy, employee safety, loan oversight and hiring policies can be stipulated in the commercial contract. A breach of this contract is said to occur when one of the parties bound by the contract does not live up to their expectations.
Commercial contracts are also commonly used to stipulate the terms of a transaction. In these scenarios one can find several types of commercial contracts, including:
- Firm-fixed-price contracts – in this type of contract, the initially agreed-on price is not subject to any adjustment. In long term commercial relationships, this can be deleterious to the contractor since it means they have to shoulder all rising costs and not pass them to the buyer.
- Definite quantity contract – this type of contract binds all the parties to ensuring that a specific quantity of supplies is delivered at a specific time.
- Fixed price contracts – these have a provision for price adjustment with an upper limit known as the ceiling price. The price is only adjustable if other clauses in the contract are triggered.
- Time and material contract – this type of contract defines the acquisition of supplies in terms of labor hours paid at fixed hourly rate.
Commercial contracts clearly cover a broad range of legal services needed. For example, drafting an effective commercial contract requires qualified legal assistance for purposes of accuracy, and to avoid loopholes in the contract. Also, commercial contract disputes are not uncommon, and you will need legal representation by an attorney to defend your interests.