The Vital importance of Protective Clauses in your Contract

The global economic climate, following the pandemic and the Eastern European conflict, makes it tougher for most companies to gain new business. Companies face more competition and often longer lead times building up sufficient trust and confidence in a new client before a decision is made to collaborate, it is no surprise that often there is a keen imperative to get the contract signed without delay, once the deal has been agreed in principle, and all parties eager to get underway. 

However, it is extremely important that enthusiasm does not replace caution and contractual clauses that are aimed at protecting the business in the event of a dispute are included. 

Olu Ajasa, a partner, commented “the commercial contract for each new or existing client is the armour that protects your business.  Regardless of how similar each clients’ requirements are to each other it is imperative that companies recognise the importance of tailoring the contract to each transaction. Also, however dispiriting the concept may be, there must be protective clauses aimed at mitigating a dispute” Olu further commented “most companies will have a precedent that broadly outlines its provision of services or goods but for each new client your contract should clearly outline all parties’ expectations in detail. Terms and conditions that are not completely clarified or drafted ambiguously can prove to be a real risk in the event of a dispute.”

The most important clauses in a contract undeniably are those that protect a business should a dispute arise. 

Alternative Dispute Resolution (ADR) clauses

In order to remove the potential for a dispute to go straight to court which is not only costly but time consuming as well as being conducted in a public arena, a clause to ensure that any dispute that arises is dealt with by means of ADR (either by arbitration or mediation) should always be included in your contract. 

Arbitration is a more commonly used process in commercial disputes and involves the appointment of either one or three completely independent qualified arbitrators. All discussions are held in private. Once all parties have made their submissions, the arbitrator will make a legally binding decision. One of the many advantages of arbitration is that the negotiations remain within the control of the parties involved.

Jurisdiction clauses

For contracting parties, particularly from different jurisdictions, the importance of jurisdiction clauses cannot be sufficiently stressed. There can be dramatic differences between jurisdictions in many respects, costs, the level of efficiency and speed of action. A jurisidiction clause will ensure that, should a dispute arise, the matter will be dealt with in a jurisdiction that is acceptable to you.

There are different types of jurisdiction clause, exclusive, non-exclusive or unilateral. Exclusive clauses, as the name suggests, limit a dispute to the courts of one jurisdiction. Exclusive clauses define the jurisdiction. Non-exclusive clauses allow either party to take the dispute to the court of any jurisdiction they find appropriate, which somewhat negates the benefit of a jurisdiction clause. Unilateral clauses, or one-sided clauses, will only allow only one party the choice of jurisdiction. In the absence of a jurisdiction clause if a dispute arises the other party may issue a claim in distant and unfavourable jurisdiction.

Governing law clauses

One of the most popular jurisdictions’ is that of England & Wales, this is principally attributed to its renowned fairness. An alternative to jurisdictional clauses is a governing law clause (choice of law), very similar to a jurisdictional clause in that such a clause determines the set of rules and laws under which a trial takes place.

Giambrone & Partners expert commercial lawyers point out that it is very much in the interests of a business to avoid the risk of having to manage a contentious dispute in the courts of a far-flung country.

Olu has extensive experience and expertise in all types of alternative dispute resolution for commercial issues, as well as commercial litigation. Olu advises on complex, high-value, domestic and multi-jurisdiction matters.

He reputation for assisting clients in complex cross-border commercial disputes, shareholder disputes, partnership disputes, contractual disputes, loan facility agreements, secured lending, both corporate and insolvency relating to individuals. Olu has expertise in resolving real estate disputes (commercial and residential) and landlord and tenant law (commercial and residential).

Olu also has considerable experience in corporate and personal insolvency matters, including preparing and responding to statutory demands, winding-up petitions, investigating company directors and also assists with all aspects of corporate insolvency litigation.

Olu is highly regarded by his clients for his resoluteness in satisfactorily concluding complex disputes swiftly and in line with their commercial objectives.

If you would like to review your contracts and agreements please contact Olu’s clerk Sam Groom SG@giambronelaw.com or please click here