What are The Challenges of Executing Commercial Contracts?

BY Nassr Albarakati Law Firm · 23 August 2022

Recognizing Defect Acceptance

In commercial agreements, the fulfillment of obligations in a manner inconsistent with the contract's terms can entitle the aggrieved party to reject the contractual item and demand compensation. However, accepting the item without objection could waive this right, as it implies acceptance of any defects. For instance, a contractor's delay in project delivery without the client's formal objection could forfeit the client's right to claim damages. Therefore, issuing a formal notice upon any breach is crucial to safeguarding rights.

The Trader's Dilemma in Claiming Unfairness

Given traders' expertise and knowledge in their domain, the judiciary often dismisses claims of unfairness by traders. Hence, it's advisable for traders to thoroughly research and understand all transaction aspects before committing, ensuring a fair and informed agreement.

Delivery and Receipt Discrepancies

Contracts must clearly define delivery dates, methods, and locations, along with the condition of the item at delivery. Ambiguities in these areas can lead to disputes, such as disagreements over who is responsible for item collection. Precise contractual terms prevent such misunderstandings.

Ensuring Clear Title in Contracts

Especially with real estate, it's essential to verify the property is free from liens or encumbrances. Failure to do so could lead to complex legal issues, emphasizing the need for thorough due diligence before contract finalization.

Legal and Sharia Compliance

Traders must recognize that contracts are subject to both Islamic law and statutory regulations. Any contract clause that violates these principles can lead to the contract's invalidation. For example, fixed profit shares in a partnership are considered usurious and invalidate the agreement.

Specificity in Execution Responsibility

To avoid disputes, contracts should explicitly state that the contractor cannot subcontract without prior approval. This ensures trust and quality control, with clear penalties outlined for breaches of this clause.

Payment Terms and Supply Obligations

Failures in meeting payment schedules or supply deadlines must be documented as per the contract's terms. In the absence of specific procedures, formal registered communication can serve as proof of breach, protecting the aggrieved party's rights to enforce the contract or seek compensation. In conclusion, navigating the complexities of commercial contracts requires attention to detail and an understanding of legal obligations to prevent disputes and protect parties' rights effectively.

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