Estate and Business Planning Legal Blog

Saturday, October 16, 2021

Critical Provisions in a Commercial Contract

               It is always a good idea for the business owner or executive to review one's company's contracts, to make sure they are current and contain important provisions. Of course, whether one is providing products or services, the description of what is being provided is a must, as is the price/fee being charged.  One of the most overlooked provisions in company contracts involves disputes. 

               One of the more important provisions in a commercial contract, whether the contract is with a customer, supplier, distributor, or other, is the jurisdiction/choice of law provision.  What this consists of, simply, is a designation of what state should govern the interpretation of the contract and any disputes.  Generally, if your company is a New York-based company, you should state in your contracts that New York law governs and that disputes must be settled in the courts here.  If your company is in New York, you certainly don't want to be hailed into court in another state. Besides the inconvenience, courts tend to favor their own residents.  You would also need to find an attorney licensed in that state, and that may be difficult as well.  Even if your company is presented with a contract from a customer, supplier, etc., the contract should be reviewed carefully to make sure this jurisdiction/choice of law provision is in your best interests.  Some contracts will specify that your are subjecting yourself to personal jurisdiction in the courts of another state.  Keep in mind, these provisions are negotiable.

  Another important provision which should be in one's contracts is a statement that the contract is not amendable except with the signed written consent of all the parties.  You want to avoid a situation where your course of dealings change what the contract states in writing, as this may not be what was intended, and proving this in a court will likely be difficult.  

  One other aspect to keep in mind is that sometimes it is in everyone's best interest to stipulate that all disputes must be submitted to arbitration, thus avoiding court costs and minimizing legal fees. Careful attention to the wording of the contracts you give and receive is essential if you want to avoid being hailed into court where there is a dispute between the parties.


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