Model contract: why it is needed and how to draw it up correctly

Model contracts and their structure: what to look for Regardless of what you do, whether it is the provision of services or the supply of goods, you should have a “model contract”. Let’s see what is meant by the “model contract” and why it is needed. First, why does your business need a model contract? A model contract is needed to ensure that when providing services / supplying goods, all issues related to the fulfillment of the obligations of each of the parties to the contract are resolved, as well as other conditions that must be agreed in advance in order to avoid negative consequences. It is an unfortunate mistake when you think that verbal agreements are sufficient. It would seem that this is already a passed stage, but no, such mistakes are still allowed and there are enough of them. When drawing up such a contract, you must simulate for yourself all possible disputable situations that may arise in the course of the implementation of the Agreement, so that you even before their occurrence provide for a settlement procedure that will protect your interests in full. Example No. 1. You have delivered the goods to the buyer, but the container in which it was delivered, you want to get back, as it can be used by you repeatedly for further deliveries. But the buyer believes that the container is included in the cost of the goods and refuses to return such containers. Of course, you can try to settle this issue in the claim procedure, and then in court, but why do you need extra time, effort and money, if you can simply provide in the contract that the container is the opposite. Example No. 2. You are a contractor under a contract contract. The contract stipulates that the term of work is 15 calendar days from the date of prepayment by the buyer. The buyer made an advance payment, the deadline for the work is coming to an end, that’s just the work you can not perform, because you agreed that you work on the materials provided by the buyer, but this was not specified in the contract. As a result, the deadlines are violated, you find out the relationship with the buyer who did not provide materials and no one wins. These are just a few of the many examples that can be cited. Every business, so to speak, has “its own vulnerabilities” and I think, whether it is the owner or the director, he immediately understands what I mean and presents his problem situation. The model contract was created not to drive the opposite side into the framework (although it also applies for such purposes), but so that everyone remains in a win-win situation. The provisions of the contract justified by the established practice and the “enslaving conditions” are two opposite concepts. Contracts with the most stringent conditions (including unreasonable) can afford only large companies and monopolists, you also need to take into account. In most cases, especially if your counterparty has a lawyer or legal department, your model contract will be amended and/or requests for the deletion of individual clauses will be received. In order for your counterparty (his lawyer) to have fewer questions / comments to the contract, it should reflect reality. After all, there are points to which the counterparty can “close his eyes”, but if the contract contains obviously unfair and unilateral clauses, then the contract as a whole will have a completely different attitude and amendments will appear more and more. Of course, there are items that are fundamentally important for you, but do not try to put the opposite side in obviously unfavorable conditions. The biggest mistake is downloading the contract from the Internet. You should treat the model contract as a local document of your company, which is able to ensure your safety and protect your interests. Abstract and template contracts from the Internet are not allowed to be used as a model contract. Ask for help from a professional lawyer, or if you have one in your state, then set tasks for him. Structure of the contract. The structure of the contract is not of fundamental importance against the background of the essential terms of the contract. As a standard, it consists of the following elements:

• name and number of the contract
• place and date of conclusion
• preamble Basic terms of the contract
• requisites of the parties.

The main thing is to remember that any contract must, at a minimum, contain the following essential conditions:

• the subject of the contract (what the contract is concluded for: property / goods, services, works, etc.)
• price
• Validity period

What risks can lead to incorrectly stated terms, unreasonable sanctions for violation of the terms and conditions Incorrectly stated terms, as well as other essential terms of the contract, are fraught with negative consequences for you. Let’s take a closer look at the issue of timing and what needs to be taken into account in the contract. Firstly, it is very important to prescribe the terms in the contract, because sometimes people simply do not do this and believe that verbal agreements are enough, and then you are faced with the fact that “deadlines are violated”, “deliveries are disrupted” and other unpleasant consequences. terms can be prescribed in calendar or working days (sometimes prescribed in banking). It is also possible to set a date by which certain obligations must be fulfilled. Note: Working days – days from Monday to Friday, except for holidays provided for by law and working days postponed to weekends in accordance with the legislation. Calendar days – days, including all seven days of the week, holidays, weekends and non-working days. Accordingly, based on your need, for example, taking into account all factors, circumstances and other conditions, you determine in which days to set deadlines for the fulfillment of certain obligations. An important nuance is to specify from what point the “move” begins. With this you need to be very careful. The most common variant is: “… within 10 calendar days from the date of conclusion of the contract.” But there may be many factors that affect the timing of commitments and the Party burdened by the timing considers that certain factors are self-evident for the other Party. As a result, disputes and disagreements arise, up to litigation. I will give an example of how the paragraph should be formulated depending on certain factors affecting the timing of commitments. “… within 10 calendar days from the date of … ” Examples

• prepayment
• Provision of materials
• approval of the sample of goods
• signing of the estimate
• delivery of goods
• signing of the Act of Acceptance – Transfer / Consumable Invoice

These options can be combined if necessary. Unjustified sanctions for violation of the terms of the contract Unreasonable sanctions can be attributed to unfair terms of the contract, which are periodically the subject of legal disputes. But I want to draw your attention to the fact that not all the terms of the contract that seem unfair to you are from the point of view of legislation and judicial practice. The provisions of the Civil Code provide for freedom of contract: the parties are free to choose a counterparty and determine the terms of the contract. Thus, even from the point of view of logic and common sense, the appeal against unfair terms of the contract should be “iron” argued, since the court most often refers to the above provisions on freedom of contract and voluntary expression of will when signing it. However, it should be noted that the decision of the Supreme Court of 18.03.2020 in case No. 902/417/18 made its own adjustments to the practice of considering such disputes. In this case, the plaintiff demands to recover from the defendant money for the delivered goods, taking into account the penalties provided for in the contract. The contract stipulated that the parties agreed to change the interest rate for violation of the terms of fulfillment of the monetary obligation provided for in Part 2 of Article 625 of the Civil Code, from 3% to 40 and 96%, but the court in its decision refused the plaintiff to recover funds taking into account the annual interest rate changed under the contract. Thus, the court in its decision stated the following “taking into account the obvious incomparability of the amounts of sanctions claimed for recovery in the form of fines, penalties and interest per annum, taking into account that it is not fair when the consequences of the debtor’s failure to perform the obligation are obviously more beneficial for the creditor than the proper performance of such an obligation, the Grand Chamber of the Supreme Court considers fair, proportionate and such that it is to meet the circumstances of this case, which have legal significance, and the above criteria, limit the amount of sanctions to the amounts of fines and penalties that have already been sentenced to recovery by the courts of previous instances, and refuse to recover them from these grounds. ” As you can see, in this particular case, the court took the side of the defendant and in the future this decision of the Supreme Court was much invoked in court disputes over unfair terms of the contract. Thus, the courts of lower instances, in accordance with the procedural legislation, should, when choosing and applying the rule of law to disputed legal relations, take into account the conclusions on the application of the norms of law set forth in the decisions of the Supreme Court. But I want to draw your attention to the fact that such conclusions apply exclusively to such legal relations, in which the subject of the dispute, the grounds for the claim, the content of the claims are similar and the factual circumstances of the case are established. From this it follows that you need to be more careful, both when signing a contract in which tough sanctions can be applied to you, and if you prescribe such sanctions. Since it is extremely difficult to predict what decision the court will make in your particular case. Therefore, there should always be a balance, do not forget to protect yourself by prescribing penalties in the contract, but you should not make the occurrence of liability for the counterparty more profitable for you than the fulfillment of its obligations under the contract. Not specific conditions of the condition in your standard contract should be spelled out in detail and specifically. The use of abstract and streamlined phrases is unacceptable, as are standardized phrases. I once again want to note that a model contract is a local act of your company, which should ensure the protection of your interests, taking into account all sorts of problematic situations in your business. Do not be afraid to write specifically and simply, if it will help to avoid disagreements with the counterparty in the future. Remember, a well-drafted contract is something that can save your time, money and nerves.Using the wording and deadlines under the law, you may be in a more advantageous position in court, using in addition to the wording from the laws, specific and detailed conditions, perhaps in court and will not reach. It is important that you and your counterparty reach an understanding of what conditions are agreed upon and that they are accurately reflected in the contract by passing through the filter of “legal language”. How to insure yourself against risks Summing up all of the above, in order to avoid negative consequences for yourself, you should follow at least the following principles / recommendations:

• treat your standard contract as in the local act of your company, which can protect you from negative consequences in the future
• model for yourself all problem situations with counterparties based on your experience, as well as potentially possible and on the basis of this lay out the terms of the contract so as to settle disputes taking into account the protection of your rights and interests
• follow the balance of interests, otherwise in your model contract will appear a lot of amendments from counterparties, which can only worsen the situation
• do not use the contract uploaded on the first one you get on the site
• remember that the contract must contain all the essential conditions, most often, it is at least: the subject of the contract, price, validity period
• lay out the deadlines for the fulfillment of obligations, taking into account all the factors that can affect this
• lay out the terms of the contract specifically and clearly. Forget about verbal agreements if they are not set out in writing. The treaty must reflect validity.