Blogs

Restrictive covenants and non-competition clauses prevent people from doing things they are entitled to do.

Depending on how they’re written into a contract, they apply:

• during the contract, and
• for a limited time only after the contractual relationship ends.

And non-compete clauses are usually difficult to enforce.

Two different people could have exactly the same contract – word for word. The restrictive covenants could be enforceable against one person, but not the other. The restrictions may be justifiable against one of them, but not against the other.

If you can identify the type of clause and what it is looking to prevent, you’ve got a better idea of:

• the type of competition which is prevented, and
• how enforceable the non-competition clauses might be.

Sometimes, what’s not in a contract is more important than what is.

You read a contract. Reading only the express terms, you might not get the full story.

There may be implied terms.

Terms implied into contracts can change what you’re reading. They can re-balance one-sided business agreements. They can address behaviour that frustrates performance of the contract.

In fact, implied terms can put you – or your contracting partner – in serious breach of contract.

Service level agreements – SLAs – fix performance standards for specified services in contracts.

So SLAs are categories of contracts which:

• contain a contractually binding legal commitment
• to deliver one or more services
• within stated tolerances.

Service level agreements lock in the performance expectations of the customer, in a legally binding agreement.

So a service level is the measure of the standard of performance by which a business must deliver its services to another contracting party.

Heads of Terms, Heads of Agreement, Letters of Intent: they all refer to and mean the same sort of thing.

They serve the same purpose.

In business, they also go by the names of “term sheets”, “memorandum of understanding”, “letters of understanding”, “heads of agreement”, “heads of terms agreement”, “letters of interest” and “term sheets”.

In the construction industry, heads of terms are often wrapped up and packaged as letters of intent or “LOIs” for short.  It’s just different terminology with the same meaning.

They’re usually exchanged by 2 businesses to reach what businesses sometimes call the “commercial agreement” – to distinguish from the sort of agreement which is legally binding. (We’ve included 3 templates below: the non-legally binding variety, contractual form and a Letter of Intent)

Once you have commercial agreement with Heads of Terms, businesses go on to prepare the formal contract document.

Here’s how. And when they can become legally binding by accident.

They’re types or classes of clauses which are commonly found in contracts.

They may look the same if you’re unfamiliar with them.

Slight differences in wording can make all the difference in their legal effect.

They’re usually inserted at the end of a contract.

But they can appear anywhere in a contract.

Anywhere.

The term “separate legal entity” is a fundamental concept in law that underlies business law and legal liability.

Not getting it right means that you could:

1. sign contracts which make you personally liable on the contract, when you don’t intend to
2. sign a contract with a non-existent legal entity, and make the contract unenforceable
3. sign a contract with the wrong company within a group of companies
4. sign a contract as the company, when you intend to sign as a shareholder.

And it’s all avoidable.

Here’s how.