Legal Consultation

Electronic Contracts

Electronic contracts initially caused great legal uncertainty as to how and whether electronic contracts could be recognised as valid and enforceable agreements. The passing of the Electronic Communications and Transactions Act (ECTA) in 2002 initiated the basic premise that digital communications are no less valid than paper-based communications.

According to ECTA, information is not without legal force and effect merely on the grounds that it is wholly or partly in the form of a data message. It is thus possible to contract by means of data messages and parties may sign agreements using digital signatures if they wish.

What you Need to Know about Digital Contracts:

The basics must be in place:

Electronic contracts must meet the common law requirements of contracts to be valid and enforceable. The minimum requirements for a valid contract under South African law include:

1. a valid offer and acceptance or consensus between the contracting parties;

2. all contracting parties must have contractual capacity. For example, a minor does not have sufficient capacity to incur binding obligations under a contract without assistance or consent of their guardian to do so;

3. the contract must be legal and capable of performance; and

4. finally, formalities are prescribed for certain contracts such as the sale of land and must be met for the contract to be enforceable.

Some agreements cannot be executed electronically:

In the case of Spring Forest Trading CC v Wilberry t/a Ecowash and Another 2015 (2) SA 118 (SCA), the Court ruled that "…when there are formal requirements of writing and signature imposed by statute or the parties to the transaction, these can generally be satisfied through electronic transactions. There are, however, exceptions where agreements may not be generated electronically. These are the agreements for the sale of immovable property, wills, bills of exchange and stamp duties." Consequently, most agreements (with the exception of the few listed above) can be concluded electronically by means of data messages.

E-mail and SMS:

In the case of Jafta v Ezemvelo KZN Wildlife 2008 JOL 22096 (LC), the Court held that “(E)-mails and SMSs and the language of text messages they carry may seem informal, but treating them as having no legal effect would be a mistake.” It is thus possible, in terms of ECTA and case law, for a contract to be concluded, varied, and cancelled by means of email or SMS. Businesses should take cognisance of this and consider excluding the right to vary or cancel an agreement by way of electronic communication in some instances. Employees should also be made aware of the risks and consequences of emails and SMSs, particularly when dealing with contractual provisions.

Time and place of conclusion:

The time and place of conclusion of contracts are important as they relate to jurisdiction and applicable law. ECTA adopts the reception theory for receipt of electronic communication, meaning that contracts are formed at the time when, and place where, the offeror receives acceptance of the offer, but acceptance of the offer does not have to come to the knowledge of the offeror for a contract to arise. This theory applies to prevent any disadvantage to the offeree by not knowing when the offeror knows about the acceptance.

When clicking on “I accept” or “I agree” on a website that offers goods for sale, a contract is concluded. However, this acceptance of the offer may not come to the attention of the seller if the thing sold is packaged and delivered automatically or through a dispatch service.

Therefore, an email or SMS will be regarded as having been received even if the addressee has no knowledge of it being in his inbox. The data message merely has to be capable of being retrieved.

Digital signatures:

ECTA defines an electronic signature as data attached to, incorporated in, or logically associated with other data and intended by the user to serve as a signature. This may include things such as typing your name at the end of an SMS or e-mail or clicking on an icon on a website to confirm your acceptance of terms and conditions. Should a contract therefore require something to “signed”, the requirement would be met if the mark inserted into the document or data message as signature is capable of demonstrating the intent of the signatory to authenticate the document.

In a technologically advancing era, businesses are relying on electronic communication to a greater extent. It is possible to enter into agreements (including their amendments or notices thereunder) not only through e-mail, but through other data messages such as SMSs. In light of the above, businesses should consider whether there are steps that can be taken to protect themselves and avoid disputes.

Limiting Liability Through Well-Drafted Indemnity Clauses

Whether you are a new entrepreneur or a seasoned business owner in South Africa, understanding and having well drafted indemnity clauses can safeguard your business against legal risks and potential unexpected liabilities from certain actions or events that take place.

An indemnification clause is a legal agreement that shifts the financial risk of potential losses from one party to another. It can limit one party’s liability by reducing their financial risk in the event of a loss or damage. It can also refer to the compensation for loss, damage and injury. These clauses are included in contracts to protect one party from potential liability or legal action that may arise during the course of business.

Enforceability of Indemnity Clauses

Indemnities are legally valid, but their enforceability depends on the particular circumstances of the case. South African courts, guided by the Constitution and public policy, decide if an indemnity is enforceable and whether negligence should prevent its enforcement in specific cases.

Factors that can be considered when determining enforceability:

Is there a voluntary agreement?
The clause must not be against public policy
The clause must not be unfair, unreasonable or unjust

Indemnity clauses can take two forms – simple clauses in a contract or a more formal indemnity agreement which exempts the service provider from specified consequences, should they arise.

Disclaimer notices are a little different from indemnity. They display an exclusion of liability clause in a public notice meant for everyone. These signs set the terms for using public spaces or buildings. Whether they can legally protect one party from liability for harm caused to another depends on the specific situation and how well the sign complies with the law, including the Consumer Protection Act.

Key Elements for an Effective Indemnity Clause

Who are the indemnifying party and the indemnified party
What are the covered claims or losses (scope of indemnification)
Triggering events
What are the obligations and duties of each party
What are the exclusions or limitations and exclusions of the indemnity
Insurance requirements
Claim procedures
Jurisdiction and governing law

Liabilities Excluded from Indemnity

Not all liabilities can be lawfully excluded from contracts. There are certain circumstances that cannot be indemnified or where indemnity clauses can exclude liability such as negligence or gross negligence, wilful misconduct, fraud and dishonesty. Further, the Consumer Protection Act and common law prohibit clauses that are unfair, unreasonable and against public policy.

Consequences of Broadly or Poorly Drafted Indemnity Clauses

Unclear or poorly written indemnity clauses may lead to different interpretations and legal battles, which are expensive, time-consuming, and harmful to business reputations and relationships. If the clauses are not clear and specific in scope and application, they can be struck down or interpreted differently than originally intended, resulting in the following:

Unintended liability
Unenforceability
Disputes and litigation
Insurance disputes and inadequate coverage
Tarnished relationships

Warranty vs Indemnity

A warranty is a legally binding promise about the quality, condition, or performance of a product or service, while an indemnity is a promise to compensate a party for losses. This is ultimately not the same thing – a guarantee of quality versus the protection against risk, respectively.

In conclusion, well-drafted indemnity clauses are crucial for limiting liability and protecting businesses from unexpected risks. Clear, fair, and legally compliant clauses help avoid disputes and unintended liabilities. Business owners must ensure their indemnity provisions are specific and aligned with legal requirements to reduce legal risks and maintain strong, transparent relationships. It is strongly recommended to consult with a legal professional to assist with drafting and reviewing indemnity clauses to ensure they are comprehensive, enforceable, and tailored to your specific business needs.

Legality Of WhatsApp And Email Agreements Under South African Law

In our modern technology and internet age, more and more gets done using internet platforms and social media, including business transactions. It is therefore important for businesses to understand the legal nature of such agreements and whether they are enforceable in a court of law.

The Electronic Communications and Transactions Act (ECTA) recognises the legal validity of electronic contracts and data messages. The ECTA defines an electronic signature as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature.” This means ECTA recognises various forms of electronic signatures and deems them equivalent to handwritten signatures for legal purposes. Clicking “I Agree” on a document sent via email or signing a document electronically on WhatsApp can be legally binding. A data message in terms of the ECTA, means data generated, sent, received or stored by electronic means, which would include WhatsApp messages.

The purpose of the ECTA is to regulate and facilitate electronic communications and transactions and it aims to:

Facilitate and regulate electronic communications and transactions
Promote universal access to electronic communications
Prevent the abuse of information systems

Legality and Enforceability of Electronic Agreements

In South African law, electronic agreements made by way of email or communication platforms such as WhatsApp, can be legally binding if the parties had the intention of creating a contract and the messages convey that intention. In the Kgopana v Matlala case, it was established that a legally binding contract can be formed and concluded through WhatsApp. Section 22 of the ECTA provides that: “An agreement is not without legal force and effect merely because it was concluded partly or in whole by means of data messages.” In Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash, it was also found that simply typing your name at the end of a data message (email, WhatsApp, social media) is enough to conclude a valid contract.

What constitutes a legally binding agreement?

Consensus between the parties
Parties must have the capacity to contract
An offer and acceptance
The obligations must be capable of performance
The parties must have the intention to contract
The agreement must be legal and lawful to be enforceable

Electronic Signatures

Whether an emoji is a valid signature depends on if it identifies the sender and shows their intent to be bound by the message, and if the method is reliably used given the context. Therefore, emojis could be valid signatures in South Africa under certain circumstances.

The ECTA differentiates between “advanced” and standard electronic signatures. An advanced electronic signature is one accredited by the South African Accreditation Authority. If the law requires a signature but does not specify the type, then ECTA requires an advanced electronic signature for electronic documents.

Section 13 provides that where an electronic signature is requested by the parties and they have not agreed to the type of electronic signature to be used, the requirement in relation to an electronic signature is met if:

a method is used to identify the person and to indicate the person’s approval of the information communicated; and
considering the circumstances and at the time the method was used, the method was reliable and appropriate for the purposes for which the information was communicated.

The ECTA further provides that an advanced electronic signature will only be accredited by an accreditation body if it is:

uniquely linked to the user;
capable of identifying that user;
created using means that can be maintained under the sole control of that user;
linked to the data or data message to which it relates in such a manner that any subsequent change of the data or data message is detectable; and
is based on the face-to-face identification of the user.

Therefore, a thumbs-up emoji for example does not qualify as an advanced electronic signature. It does not identify the user, link to their identity, remain under their sole control, detect changes to the data, or involve face-to-face identification, all of which are requirements for an advanced electronic signature.

Pertaining to record keeping, the ECTA allows for the keeping of records in electronic form, but it does not provide details or guidelines on what should be implemented in practice by different organisations.

In conclusion, to formalise a WhatsApp or email agreement, the parties need to ensure that the contract can be deemed legally binding, it must be reduced to writing or record of same must be available and the agreement must be signed by the parties. It is therefore advisable to be cautious when negotiating or making offers online, via instant messaging, or email as these communications could create legally binding agreements.

* Take note that the Consumer Protection Act regulates online agreements and protects the rights of consumers.

Using Compromise To Resolve Pricing Disputes During Contract Negotiations

Pricing disputes often arise during contract negotiations, but finding a resolution is crucial to fostering long-term business relationships. Business owners can benefit from adopting compromise as a strategic tool to bridge gaps and reach agreements that work for all parties.

Compromise does not mean surrendering. It involves finding a middle ground where both parties make concessions to achieve a mutually acceptable outcome. This requires active listening, empathy and a willingness to explore alternative solutions.

Successful price negotiation is crucial for building strong business relations. Typically, price negotiation involves a buyer and seller discussing and agreeing on the financial terms of a transaction. These negotiations play a significant role as it can impact the cultivating of lasting business relationships, prompt more business opportunities, and protects all parties’ interests.

Mutually beneficial price negotiations

There are some techniques that can be applied in such negotiations in the attempt to get to a conclusion which is beneficial to all parties involved:

Be realistic and reasonable with your pricing
Find common ground to keep negotiations moving
Ask for modifications in moderation
Try offer a discount if a stalemate is reached
Consider what you are willing to give up or change
Do your due diligence on the other party
Try price anchoring
Aim to win-win

It is important to document the price terms that have been agreed to, for mutual understanding and accountability, to avoid further disputes and for enforceability should a dispute arise. Documented payment terms aids in stabilising cash flow and following through with budgets, as it manages expectations as to when money is to come in or leave the business.

With fluctuating market and economic trends, it would be worth considering including miscellaneous clauses that deal with factors that are out of the business’s control, but have a significant impact on pricing and finances.

For example:

Changes in the Consumer Price Index
Legislative changes on minimum wages

Strategies for Communicating Price Adjustments

Suppliers will have to employ some creativity on this aspect where a dispute arises depending on their products or services and their client base.

However here are a few considerations to get started:

Market research and market trends affect price
Focus on customer value
A win-win outcome for both parties
Deliberate word choice helps build connections and elevate trust

Compromising to resolve pricing disputes is a worthwhile consideration as it fosters collaboration and long-term business relationships. Clear documentation of the settlement ensures that agreements are fair, sustainable, and mutually beneficial.

When a Memorandum of Understanding (MOU) Becomes Enforceable

A Memorandum of Understanding (MOU) can be a valuable tool for businesses to avoid legal disputes by providing a clear framework for collaboration and setting mutual expectations. It assists in establishing a common understanding and provides a framework to work from for future agreements.

An MOU is often used in early stages of negotiations between parties to set out a common intention and a framework for possible future collaboration. It is a formal document outlining the terms of a mutual understanding between parties. Though an MOU is generally not legally binding, its purpose is to manage legal risks by providing the following:

Clarity and Mutual Understanding: reduces the risk of misunderstandings and disputes between parties.
Framework for Future Agreements: lays the groundwork for more detailed, legally binding contracts, ensuring all parties agree before making a formal commitment.
Documentation of Intentions: serves as a written record of the parties’ intentions, which is useful in case of future disagreements or legal disputes

An MOU can become legally binding if it contains all essential contract elements. Its binding nature depends on the specific language, intent, and relevant law. To be legally binding and thus enforceable, an MOU must include essential terms (those necessary for court enforcement), or clearly state which parts are binding and which are not.

Essential elements of a valid contract:

Offer and acceptance
Exchange of value (consideration)
Intention to create legal relations
Capacity to contract
Legality of purpose

A poorly drafted MOU may make it difficult to raise and negotiate new points which were not included in the initial agreement. The lack of clarity leads to ambiguity and uncertainty which result in conflict and disputes and the inability to hold parties accountable. This ultimately will lead to the unenforceability of the agreement.

If you believe an MOU may be crucial to your business, seek legal advice. An attorney can assess the specific circumstances and advise on the risks and potential enforceability. Remember to keep clear records of all communications, negotiations, and agreements related to the MOU.

By carefully drafting an MOU and considering the key elements and potential issues, it sets a foundation for successful and mutually beneficial collaborations.

Understanding The Cooling-Off Period For Direct Marketing Contracts

A consumer is allowed to cancel certain agreements within a set period of time after entering into it without having to provide a reason and without incurring penalties.

A sale agreement or transaction generally has a period of time after the sale or purchase has been made where the purchaser can cancel the agreement or return the goods in exchange for a full refund.

The Consumer Protection Act provides consumers with the right to a cooling off period in terms of a direct marketing agreement. The consumer has the right to cancel a direct marketing transaction without penalty or reason by notifying the supplier in writing within five business days of either the transaction date or delivery of goods, whichever is later. The consumer must return the goods and the supplier must refund any payments made.

Direct marketing is defined as approaching someone in person, by mail, or electronically to directly or indirectly: (a) promote or offer goods or services for sale; or (b) ask for a donation.

The consumer has a right to protection against direct marketing, meaning that businesses that directly market goods or services must inform consumers of their right to cancel the agreement within a five-business-day cooling-off period.

The Act’s requirements do not however apply to the following agreements:

Businesses with an annual turnover or property worth more than R2 million
Labour agreements
Credit agreements
Agreements entered into outside the borders of South Africa
Agreements that are not in the ordinary course of the supplier’s business
The State

Practical steps in compliance with this requirement:

Adding a clause to the contract specifically stating the cooling off period
Ensuring the telephonic sales script makes mention of the cooling off period and verbally communicating it
Online sales must include the term once the sale is concluded
Invoices can stipulate the return and/or cancellation policy

The Act provides consumers with this kind of essential rights ensuring they can cancel transactions without penalties. Businesses must ensure they comply with these provisions by clearly communicating the cooling-off period in contracts and sales interactions.

Risks Of Verbal Agreements And How To Formalise Informal Business Deals

In the dynamic entrepreneurial landscape, speed and agility are often prioritised. This can sometimes lead to the temptation of relying on verbal agreements to expedite deals. While verbal agreements are legally binding in South Africa, they carry significant risks that could harm your business.

Verbal agreements are informal contracts that very often result in disputes over the terms and conditions that were agreed on. Written agreements are important for any business for the sake of having documented evidence of what was agreed to upon entering into the contract.

Enforceability of a verbal agreement

Verbal agreements are recognised as legally binding in South African law, if the agreement has all the elements of a valid contract, being offer and acceptance, mutual consent, intention to create legal obligations and the exchange of value – but can be difficult to enforce. To enforce such an agreement, its existence and its specific terms must be proved. The proof may include:

• Witness testimonies

• Any documentary evidence supporting the implementation of the agreement:

o A letter, email and/or text message which will assist one to ascertain the contractual relationship between the parties

o Proof of payment, quotes or transactional statements showing the offer and/or acceptance

• Demonstrating that the agreement meets all legal requirements of a contract

• Recordings of a conversation

• Any other relevant information that supports your claim.

There are however certain types of agreements that must be reduced to writing and cannot be enforced as a verbal agreement. This includes agreements involving the sale of immovable property and suretyships.

Challenges in proving the existence of the agreement

Proof of Existence and Terms: Oral agreements are hard to prove because there is no written record of the agreed-upon details, making disputes difficult to resolve.
Uncertainty and Ambiguity: Oral agreements can easily lead to misunderstandings and disagreements about the terms.
Statutory Requirements: South African law requires certain contracts, like property sales, long-term leases, and wills, to be in writing.

From informal verbal to formal written

To reduce a verbal agreement to a formal and valid written contract, in addition to the available proof of the agreement, essential contractual elements must be established:

• the parties must have the capacity to contract;

• there must be an offer and acceptance;

• there must be an exchange of value;

• the contract must be possible; and

• the contract must be lawful.

How to Formalise Business Deals

Use a Legal Template: Start with a contract template drafted by a legal expert. These templates are designed to cover essential terms and protect your interests. They can often be adjusted to suit specific circumstances.
Write It Down: If a template is not available, put the verbal agreement in writing, even if it is on an email. Include the most critical terms: the scope of work, responsibilities of each party, payment terms, deadlines, and how disputes will be resolved.
Be Cautious with Online Platforms: While online tools offer convenience, they may not cater to South African law. Using them without proper review can lead to insufficient or incorrect agreements.
Seek Expert Help for Complex Agreements: For high-value or intricate deals, consult a legal expert. They can draft a comprehensive contract tailored to your needs and ensure it protects you from unexpected liabilities.

It is beneficial to formalise a verbal agreement as a written agreement provides a clear record of the agreed terms, minimising disputes and making enforcement easier in court. It is essential for any business to have written agreements for the purpose of having evidence to prove the terms of the agreement and especially for potential disputes that may arise. It is recommended that business agreements be reduced to writing for the protection of the business.

Fixed-term Contracts for SMMEs

The Labour Relations Act 66 of 1995 (LRA) affords protections to employees who are employed on fixed-term contracts. A fixed-term contract is a contract of employment that terminates on the occurrence of a specific event, the completion of a specified task or project, or a fixed date other than an employee’s normal or agreed retirement age.

Protection for fixed-term employees:

Fixed-term employment contracts with lower-earning employees are limited to a 3-month period. After 3 months, the employee will be deemed to be a permanent employee of the employer and will therefore be protected against unfair dismissal.

This protection, however, only applies to lower earning employees, which are employees who earn less than the prescribed earnings threshold.

This threshold is currently R205,433.30 per annum. This means that employees earning more than the threshold will not enjoy the protections afforded by the LRA relating to fixed-term contracts.

Exempted employers:

Employers should further take note that these protections will not apply to a small employer that employs less than ten employees or to an employer that employs less than 50 employees and whose business has been in operation for less than 2 years (a start-up business).

When can a fixed term agreement be extended beyond 3 months?

An employer may engage an employee on a fixed-term contract for a period of longer than 3 months only if:

• the nature of the work is of a limited or definite duration, for example where building will take longer than 3 months; or

• the employer can demonstrate a “justifiable reason” for the longer term, for example employing a student or recent graduate for the purpose of gaining work experience.

Formalities of Entering or Renewing Fixed Terms Contracts:

A fixed-term contract or the renewal or extension of a fixed-term contract must be in writing and must state the reason for fixing the term. If a dispute should arise regarding the fixed-term contract, the employer will have to prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed upon by the employer and the employee.

Additional Protections

Employees who are employed on a fixed-term contract also enjoy the following additional protections -

• Equal Treatment: where an employee is employed on a fixed-term contract for longer than 3 months, such employee may not be treated less favourably than a permanent employee who is performing the same or similar work, unless there is a justifiable reason for the different treatment. This would mean that they are entitled to equal pay, equal benefits, and equal leave entitlements. Factors to be taken into account when considering whether there if a “justifiable reason” for different treatment may include seniority, experience, length of service, merit, quantity or quality of work performed, and any other non-discriminatory reason.

• Equal Access: employers must ensure that they provide employees employed on fixed-term contracts and employees employed on a permanent basis, with equal access to opportunities to apply for vacancies at the employer.

• End-of-term Payment: where an employee is employed on a fixed-term contract which exceeds a period of 24 months, the employee is entitled to severance pay upon termination which will be equal to one week’s pay for every completed year of service.

• Reasonable Expectation of Renewal: where the employer has failed to renew a fixed-term contract where the employee “reasonably expected” the employer to do so (or where the employer offered to renew it on less favourable terms), the basis for an unfair dismissal claim has been extended to also include an expectation of indefinite employment. However, the employee will have to prove the existence of such an expectation.

SMMES can therefore employ on a fixed-term contract for a maximum period of 3 months, which period can only be extended under the circumstance as set out above. Should the fixed-term contract, however, be extended beyond 3 months, the employer must take note of all the benefits that the employee will enjoy.

Negotiating an Agreement prepared by Another Party

A well-negotiated contract is the best way to secure a mutually beneficial outcome and avoid dispute with minimal trade-off.

A written contract is a great way to protect a business relationship. It outlines the terms of the agreement in plain black-and-white so there is no confusion and no misunderstandings.

The parties to the contract are bound by promise (undertaking) and duty (obligation) as stated in the contract. The contract will stipulate what the consequences are of not fulfilling or failing to deliver as promised.

One-sided Agreements

When preparing an agreement you establish the basic rights, duties, and obligations of each party, with the intention of developing a balanced agreement, whether unilateral or bilateral. However, very often one party may be of superior power or influence, or the drafter, for whatever reason, may prepare a contract that favours one party over the other. One party, for example, may be indemnified against loss but not the other, or only one party may be entitled to terminate the agreement. In such instances only one party has the benefit of protection, and the other party is exposed to loss of income and claims for damages, or trapped in an interminable relationship that simply does not work.

How does one ensure that the agreement prepared by the other party is fair, reasonable, and unbiased in either party’s favour? The objective is to ensure a mutually beneficial outcome and avoid dispute with minimal trade-off. This is achieved through negotiation. A well negotiated contract secures the business owner’s position, so they can focus on profit-making activities.

Basic Negotiation Techniques

Applying a few simple negotiation techniques may prevent future disputes and loss of income. Read and understand the contract and ensure that the agreement is clear and understandable. Then remove any ambiguity and get help interpreting content if you are unclear on terms. This includes interpretation of commercial and transactional terms or legal aspects.

Understanding basic legal requirements or principles will help guide you to ask the right questions, such as —

• Does the other party have the capacity (ability) to enter into the agreement? A minor, for example will not have capacity and it is important to establish whether the person signing on behalf of an entity (company or CC) is authorised to do so.

• Are there any specific laws that apply? This may be the case when selling or buying land/property, dealing with long leases or ante-nuptial contracts. Does the contract contain any illegal elements that is contrary to any law or norm and, if so, is the agreement enforceable?

• Do you understand clearly how to terminate or exit the contract and under what circumstances are you entitled to do so? If a material breach is grounds for terminating the contract, what exactly comprises a material breach?

• Determine and record what the significant dates or events are and the consequences of non-compliance.

As you would for any negotiation, prepare and agree on the major elements before contract preparation commences. This will avoid high costs and time delays and manage expectations. Be clear on your objectives and, among the detailed and complicated provisions, ensure that your objectives have not been lost. Establish concessions and trade-offs at the outset as this can be a powerful tool to ensure you get what you want.

Most importantly, don’t be afraid to ask for a change and if you do not receive the change requested, don’t be afraid to walk away from a dubious contract.

Proceed with Caution

Consider the following scenarios and provisions of a contract you are executing to determine whether there is a differential bargaining power or other influences which may result in a biased contract:

• Understand the termination and breach clauses (who may terminate and for what reason);

• Determine whether one party is entitled to independence in decision making but the other party still controls various aspects of the relationship, such as an independent contractor or supplier of services required to report daily to a manager;

• Consider onerous requirements for release of payment such as submission of security documentation or guarantees in terms of loan or supply of goods agreement;

• Identify all major risks to your business such as time delays on replacing damaged goods. Mitigate such risks by checking all time references, such as a 7-day notice to replenish stock or 48-hour delivery and amend these clauses to suit both parties;

• Identify when risk and ownership passes. Ownership of goods can pass on first or full payment, however risk should only pass when the goods are in your control, i.e., within your property and under your insurance cover;

• Warranties, indemnities, and representations must be considered carefully. A warranty is an undertaking or promise. An indemnity is a protection against loss and a representation is a portrayal that something is a certain way. Each of these elements is connected, as it creates an obligation by one party to the other. If, for any reason, you are unable to honour a promise, or cannot afford to cover a claim for loss, you may be faced with a potential loss of future income;

• Limitation of liability and disclaimers should apply to both parties equally. However, if applied to one party only, the other party carries the burden of loss if there are any claims whether direct or indirect; and

• Protection of intellectual property and similar provisions should apply to protect ownership, rights, and title to any new or unique product, service, process or know-how, including any future enhancements.

Any form of biased, one-sided, or unbalanced agreement favouring one party over the other to gain advantage, rarely results in creating benefits for either one or both parties. Such agreements may result in disputes or a breakdown in trust and the eventual demise of the relationship and may destroy businesses. To prevent abominable and catastrophic consequences to your business, apply simple techniques for preparing, negotiating, and executing balanced agreements that demonstrate trust and a foundation for long term relationships.

Good Faith in Negotiating and Enforcing Contracts

The Good Faith Principle

How is the Good Faith Principle valuable to my business?

The Use of Artificial Intelligence Clauses in Contracts

Thank you!