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THE STRUCTURE OF A COMMERCIAL CONTRACT (3) - THE PARTIES

Updated: Mar 4


“INTERNATIONAL DISTRIBUTION AGREEMENT [The Heading]


THIS AGREEMENT IS ENTERED INTO ON THIS 18th DAY OF FEBRUARY 2021 [The Date and Commencement]


BETWEEN


HAPPY SKIN Inc (hereinafter referred to as “HSI”), a Company registered in the State of California, having its office at 9876 Slick Boulevard, San Jose, California


AND


THE DISTRIBUTOR CAMDIS Limited, (hereinafter referred to as “CAMDIS”) whose registered office is at 12 Mountain Road, Cambridge, England, and whose registered number is 49820912. “


The next section in the introductory parts of our commercial contract is called ‘the Parties’.

Before we look at the parties, we can see that they are introduced by the word ‘BETWEEN’. This is the most usual way of introducing the parties to the contract. However, you may sometimes see other ways of introducing them, including:


‘BY AND BETWEEN’ or

‘AMONGST’.


‘BY AND BETWEEN’ is very formal. Although a commercial contract is, obviously, a formal legal document, it involves two parties who are basically agreeing something and entering an amicable and consensual relationship. Using ‘BETWEEN’ reflects this situation much better than ‘BY AND BETWEEN’, which now sounds very old-fashioned (archaic).


The parties to our contract are Happy Skin Inc and Camdis Limited. Before we look at this section a little more closely, it is important to ensure that all parties to a contract have the necessary authority and capacity to enter into it. This may sound a straightforward matter, but it should not be overlooked. For example, particular problems may arise in relation to a contract with an agent or trustee. If one of the parties is a company, it is a good idea to look at the different levels of authority.


The point here is simple. If one of the parties to the contract does not have authority or ‘legal capacity’, the contract may not be valid (legally enforceable).


The full details of the parties to the contract should be set out clearly. If a party is a company, its name, the address of its registered office, and its registered number should be clearly set out. Essentially, the details about the company that should be set out are the ones that – under applicable civil law – would be needed when commencing legal proceedings (in England & Wales, a ‘Claim Form’) against that company. In the United Kingdom, the ‘registered office’ of a limited company is the place where legal documents (such as a Claim Form for commencing legal proceedings) can be served and accepted.


In the section dealing with the parties, you can see the names of the companies. Following the names, our extract clause has an open bracket, followed by the words ‘hereinafter referred to as…’.


‘Hereinafter’ is an example of a word known as a ‘compound adverb’. A compound adverb is, essentially, an adverb made up of two or more adverbs. The word ‘hereinafter’, for example, is made up of three adverbs:


· here

· in

· after


We should note one or two things about compound adverbs:


· they should not be used in modern English legal documents (including commercial contracts) as they are archaic (old-fashioned/out of date);

· they can often create confusion in a legal document when they are used.


We have provided this example, however, because you will still see compound adverbs (and other ‘traditional’ language) used in contracts in other English-speaking jurisdictions, such as India and states of the United States.


In relation to the compound adverb ‘hereinafter’, if we break it down into its parts, it becomes slightly easier to understand:


· ‘here’ means ‘this document’

· ‘in’ means…’in’

· ‘after’ means ‘after this point in the document.


Putting those together, we can see that ‘hereinafter’ basically means ‘after this point in this document’.


It is used in this context as a way of shortening names – for example, ‘Happy Skin Inc’ becomes ‘HIS’. One of the reasons for doing this is to shorten the length of the document. Some companies have very long names. If you read our blogs and notes regularly, you will see that we often refer to companies involved in legal proceedings. For example, in a recent post (2nd March 2021) we referred to a case called ‘Helice Leasing SAS v PT Garudo Indonesia (Persero) TBK. Now imagine if you had to write the names of those companies out in full, every time you wrote them in a contract!


Shortening the name of a company in this way is one way of identifying it briefly. There are other methods of doing the same thing, which we will consider in another post in this series.

Finally, you may have heard of one way of describing the parties to a contract as ‘the Party of the First Part’ and ‘the Party of the Second Part’. This form of identification of the parties is archaic and should not be used.


Let us now add some further parts to the ‘introduction’ to our contract.


“INTERNATIONAL DISTRIBUTION AGREEMENT [The Heading]


THIS AGREEMENT IS ENTERED INTO ON THIS 18th DAY OF FEBRUARY 2021 [The Date and Commencement]


BETWEEN [the Parties]


HAPPY SKIN Inc (hereinafter referred to as “HSI”), a Company registered in the State of California, having its office at 9876 Slick Boulevard, San Jose, California


AND


THE DISTRIBUTOR CAMDIS Limited, (hereinafter referred to as “CAMDIS”) whose registered office is at 12 Mountain Road, Cambridge, England, and whose registered number is 49820912.



WHEREAS HSI is the manufacturer of a range of high-quality skin care products, including skin creams, lotions, and moisturisers designed to promote healthier skin


WHEREAS CAMDIS is an international distributor and is engaged in the marketing of skin care products to various international markets


WHEREAS CAMDIS, which is engaged in the marketing of skin care products in the United Kingdom (hereinafter referred to as ‘the Territory’) has proposed to distribute various skin care products produced by HSI, including skin creams, lotions, and moisturisers that are designed to promote healthier skin (hereinafter called ‘the Products’)


WHEREBY in consideration of the foregoing it is agreed as follows….”




© Cambridge Legal English Academy 2021





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