Common Mistakes in Contract Drafting

Losses Resulting from a Bad Contract

A contract is a legal document binding you and another party to certain obligations. This is very important on commercial transactions. Merchants rely on contracts to enforce their legal rights. Making one tiny mistake in drafting a contract could mean a lot to a business:

  1. loss of time in disputes when time can be spent in business course
  2. loss of money in disputing through legal proceedings
  3. loss of reputation due to publicity of disputes
  4. loss of customers if the dispute relates to your customers. 

Before you sit down to create a contract, take some time to learn the most common mistakes business owners make when they're drafting a contract.

6 Common Mistakes on Drafting Commercial Contracts

Mistake #1: Being unprepared. 

Insufficient facts, figures, and data. Insufficient understanding of costs, due dates, obligations, responsibilities

Mistake #2: Not binding as a "contract." 

Contract has a legal meaning in law. If you don't put sufficient elements in it, it fails to be enforced in court.

Mistake #3: Terms too vague. 

The terms and clauses are too wide or too vague to cover sufficient matters. It therefore leaves much room for disputes or arguments. Some are supplemented by oral terms which become factually arguable.

Mistake #4: Confusing wording. 

Sentences are too brief or unclear. At times, wrong wordings or words are used. Terms are drafted in bad English or incomprehensible terminologies.

Mistake #5: Too hurried. 

Parties rushed to sign the contracts just want to get the deal done as quickly as possible. Many terms are left opened and undecided. This results in room for disputes.

Mistake #6: Not using a lawyer.

You can prepare a draft or set out your most important terms and conditions. But you should always find a lawyer to review the final document. If you don't know a thing, you just don't know. Don't think that you are as good as a lawyer. It's better to be overly cautious now than to be sorry later. A dispute can cost 10 or even a hundred times of your legal expenses. A lawyer makes a little less but a dispute can ruin your life or cost your entire business.


Corporate & Commercial Legal Matters

Our Corporate & Commercial Legal Practice handles major aspects of business, financing, corporate structuring, acquisition and disposition of assets and shares, joint ventures and cooperation issues facing businesses.

Area of our Legal Practice

Our legal practice in this area includes the following:

  • Restore a dissolved company www.RestoreCompany.com
  • Company secretarial services 
  • Commercial agreements, including distributorship and franchising contracts, agency contracts, construction contracts, agreements for the sale, purchase or manufacture of goods, and management and consulting contracts 
  • Corporate assets or shares purchase and disposition 
  • Corporate organization and reorganizations 
  • Establishment and maintenance of corporate structures using Hong Kong and offshore entities 
  • Intellectual property matters including registration, licensing, protection and enforcement of trademark rights, patents, registered design and other intellectual property rights 
  • Joint ventures 
  • Labour and employment issues 
  • Liquidation and winding-up of companies 
  • Corporate mergers and acquisitions 
  • Venture capital and private equity transactions

What is a Discretionary Trust in Hong Kong laws?

Purposes

In Hong Kong, discretionary trusts are used by families to make long-term financial provision for sons and daughters. It is a form of "family trust". The key point about a discretionary trust is that funds or property put into the trust do not count as assets for the purposes of benefits or in terms of the responsibility of the local authority or health authority to fund care. This is because the funds put into a discretionary trust do not belong to the beneficiaries but to the trust.

Why is it called a Discretionary Trust?

This kind of trust is administered by trustees. The deeds which set up the trust give the trustees discretion as to how the funds are to be used. The intended beneficiaries have no rights to either the income or capital held in trust. To work in terms of financial planning for children an additional characteristic is usually that the trust is set up for the benefit of a group of people, not a single person. This can be a 'class' of beneficiary of whom the son or daughter is a member, for example all people with Downs Syndrome or with an Autism Spectrum Disorder.

Can I put my house into a Discretionary Trust?

Yes. Your home is an asset and can therefore be put into trust. This is commonly done through setting up a trust in the parents' will which makes provision for the property to be put into trust. There are several reasons why this may be a good idea.

  • First, the trustees can undertake the task of managing and maintaining the property. This is particularly important where the disabled person may lack legal capacity and therefore would be unable to manage money and to contract for the maintenance services. 
  • Second, because the property is put into trust it does not belong to the individual and therefore cannot be subject to a legal liability owed by a beneficiary.

Media Law, Hong Kong

Media law refers to the following:

  • Advertising: agency and sales contracts
  • Broadcasting and public performance
  • Censorship and regulations
  • Confidentiality
  • Contempt
  • Copyright
  • Defamation: slander and libel
  • Entertainment and sports
  • Freedom of or access to public information
  • Internet
  • Information Technology
  • Privacy and personal data

Entertainment Law, defamation, music

Entertainment law is generally sub-divided into the following areas:

  • DEFAMATION (LIBEL OR SLANDER)
    Hong Kong's defamation laws protect reputation of  a person. Generally speaking, Libel means defamatory statements made on papers or a fixed media while slander is something verbal. The difference is legally important !
  • FILM
    covering option agreements, finance, chain of title issues, talent agreements (screenwriters, film directors, actors, composers, production designers), production and post production and trade union issues, distribution issues, motion picture industry negotiations distribution, and general intellectual property issues especially relating to copyright and, to a lesser extent, trademarks
  • MULTIMEDIA
    including software licensing issues, video game development and production, Information technology law, and general intellectual property issues
  • MUSIC
    including talent agreements (musicians, composers), producer agreements, and synchronization rights, music industry negotiation and general intellectual property issues, especially relating to copyright
  • PUBLISHING
    and print media issues, including advertising, models, author agreements and general intellectual property issues, especially relating to copyright
  • TELEVISION and RADIO
    including broadcast licensing and regulatory issues, mechanical licenses, and general intellectual property issues, especially relating to copyright
  • THEATRE:
    including rental agreements and co-production agreements, and other performance oriented legal issues
  • VISUAL ARTS AND DESIGN
    including fine arts, issues of consignment of artworks to art dealers, moral rights of sculptors regarding works in public places; and industrial design, issues related to the protection of graphic design elements in products.

Intellectual property rights and Legal aspects of Information Technology

We provide a wide range of Intellectual Property (“IP”) and information technology legal services:

  • patents
  • trademarks
  • copyright
  • registered designs

We also give legal advice to clients on confidential information or trade confidential informtion. 

We also advise information technology enterprises or clients on legal aspects of IT:

  • software escrow
  • IT contracts
  • domain names transfer. 

We offer legal help to IP and IT owners in litigation for the enforcement of and defence of intellectual property rights of all kinds, including obtaining injunctions and other relief in Hong Kong.


Prenuptial Agreement in Hong Kong

A prenuptial agreement in Hong Kong is commonly abbreviated to prenup or prenupt.

A prenuptial agreement  is a contract entered into prior to marriage, civil union or any other agreement prior to the main agreement by the people intending to marry or contract with each other. In the situation of Hong Kong, we mean 'prior to marriage".

Objectives

  • to cut huge legal fees in disputes that can last for years
  • save parties from mental trauma in litigation
  • resolve financial issues more easily
  • reduce chance of personal attacks which hurt both parties
  • option to deal with marital relation

Content of Prenuptial Agreement

The content of a prenuptial agreement can vary widely, but commonly includes:

  • division of property and 
  • spousal support in the event of divorce or breakup of marriage
  • terms for the forfeiture of assets as a result of divorce on the grounds of adultery
  • conditions of guardianship 

In some countries, including the Netherlands, the prenuptial agreement not only provides for the event of a divorce, but also to protect some property during the marriage, for instance in case of a bankruptcy. Many countries, including Canada, France, Italy, and Germany, have matrimonial regimes, in addition to, or some cases, in lieu of prenuptial agreements.

Postnuptial agreements are similar to prenuptial agreements, except that they are entered into after a couple is married.