Understanding Commercial Agreements: What You Need to Know to Protect Your Business

The contracts that your business has with its landlords, clients, employees, vendors and/or suppliers are the components that help create the framework of your company. Everything your organization does depends on the protection and support of the terms and conditions in its contract (s). Nonexistent or vulnerable contracts have the potential of undermining a company, abruptly putting you at risk of liability or worse. A well written, detailed commercial agreement will protect an organization from risk and liability and at the same time makes it possible for the court to better evaluate the intent of all parties if a dispute happens to comes into play.

What is a Commercial Agreement?

A commercial agreement is any contract that relates to the provision of goods or services bought, sold, licensed or used in the course of a businesses’ operations. Examples of these contracts include but are not limited to the following:

• IT /Data agreements
• Real estate industry leases
• Work For Hire agreements
• Purchase of goods agreements
• Professional service agreements
• Agreements for the lease, sale, repair or maintenance of equipment

Commercial agreements make the applicable parties’ obligations and rights more predictable in association with a transaction or service distribution and shed light on the best strategies to use to resolve disputes. Alternatively, the most significant drawback is that commercial agreements can also produce commitments that either party could potentially outgrow during the relationship.

Following are a few of the most common types of commercial agreements.

Leases, Potential Risks and Obligations

Industrial leases are most likely to be the most significant obligation that any business owner incurs during their early years in business. A lot of property owners/managers require a personal guarantee via a lease term from the business owner, a guarantee that comes with a substantial risk for a lot of people. It is very important to make certain that any rights and uses authorized in the lease match up with precisely what the organization necessitates immediately, as well as for the lifetime of the lease and in some cases beyond. Real estate insurance coverage is important, but it is paramount that the tenant understands the exceptions to coverage and real costs of the policy before signing. Be certain that the policy covers that location and that activity. In addition, it’s important that the lease location isn’t a Superfund site or located in a flood zone.

Work for Hire (WFH) Agreements

Work for Hire agreements are utilized for the development as well as transfer of creative facets of services. When you hire somebody who isn’t actually your employee, say for example a freelancer, and the commissioned work is categorized outside the 9 categories indexed in the copyright statute, all legal rights to the work stay with the creator. In order to transfer the rights each party is required to sign a written Work for Hire agreement which typically states that all rights, including intellectual property rights, title and ownership, are owned by the buyer, not the creator.

Commercial and Industrial Leases

Leases are specific commercial contracts for the right to make use of specified space in restricted ways for a pre-determined period of time. There are templated, commercial lease forms that are extensively used. Smaller, less complicated leases are usually put together using a template while more comprehensive leases require more customization. Industrial leases adhere to a different process altogether, since each industrial space is different, meaning there aren’t any generally approved templates that make a good starting point for negotiating for these spaces. Authorized uses of industrial space must be negotiated, due to the fact that different uses can have significant risks for the landlord.

IT Agreements

The criteria that’s incorporated into an IT agreement has developed over time, and today that includes software, hardware, cloud based services and data licenses. Practically every organization, not only IT companies, have IT agreements in place for crucial inputs and services. The conventional terminology associated with liability, including indemnifications and warranties, in an IT agreement is relatively different from other forms of commercial agreements for services or goods. In addition, IT agreements have evolved over time as more products and services are presented over the Internet. A number of the agreement terms can be negotiated, however, most can’t, or at least not easily, as the trend is for the traditional agreement terms to be presented and agreed upon in a specified online template. The online delivery of IT solutions is a lot more reliable and efficient than the previous delivery methods, however this also means that in generating a practical process for online delivery, the agreement terms aren’t negotiable; they’re agreed to by clicking on the provided “I Accept” button. Still, these agreements are usually enforceable under United States law, not always the case in all European countries.

Professional Services Agreements

These agreements are typically utilized by lawyers, accountants and professional advisors, and the language of these agreements is governed by professional associations, state bars and various other comparable bodies. These professionals are bound by their ethical and specialized rules in relation to how they provide services, and according to what circumstances they can terminate the association. Since the relationships involved in these situations frequently develop over time, the description of the service provided is more versatile than a Work for Hire or various other service agreements.

The best way to protect your business is to understand and realize how important your agreements are. Enlisting the help of a business attorney that will take the time to understand your business and come up with the perfect commercial agreements will make all the difference. It’s important to remember that not all pitfalls can be negotiated away. That being said, having an attorney as part of your success team will help you avoid risks, reducing the amount and effect of unpleasant and unexpected surprises, freeing you up to concentrate on growing your business. Contact Jurado & Farshchian, Attorneys at Law today – (305) 921-0440 or email info@jflawfirm.com. We have the experience and expertise you need to better avoid unforeseen problems.

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