Contract Basics – Top 5 Tips
As a business, you will stand or fall according to the quality of your offering and your relationship with your customers and suppliers. Of course, prevailing economic winds will also play their part but there’s not much you can do on that front. But what you can do is ensure the terms on which you engage with customers and suppliers are clear, correctly represent what has actually been agreed and are enforceable. This is the best way to avoid disputes and to get the credit when you choose to go above and beyond your obligations.
1. Know Who You’re Dealing With
It’s not uncommon for the wrong party to be named in a contract, sometimes because it’s part of a group of companies and sometimes because it’s colloquial name is used. Verifying each party’s full legal name (and number if it’s a company) is essential. But also, be aware that if your contract is with someone trading as a consumer, rather than a business, you may well be subject to consumer protection laws, affecting what you can agree and what kind of information you must provide.
2. Say What You’ll Do and Say What You Won’t Do
Many disputes arise because the customer had certain assumptions, the supplier made others and the contradiction was never teased out. Setting out what the supplier won’t do is a great way of ensuring that the customer doesn’t sign up expecting more than has been priced up.
3. Think About What Might Go Wrong
Sometimes things go wrong and no doubt you will work to find a commercial solution. So it’s helpful to have the contractual right to do so before anyone even thinks of terminating or, worse, going to the courts. Moreover, it is essential to agree the limits of your liability in all circumstances, bearing in mind that some liabilities cannot be limited at all.
4. Remember the Contract is Just the Start
This is particularly true for services agreements and is also relevant to product sales with warranty commitments. As circumstances change over time, you or the other side may need to request changes to the contract. This is always possible by consent between you but it can be helpful to include a change control process to ensure that the implications of any changes are fully considered – not least so that any changes necessary to price or to deadlines are made at the same time.
5. Choose the Right Style
A small value one-off contract doesn’t usually need 60 pages of dense legal text. Standard terms and conditions should not hide onerous or unusual terms in the small print. Documents cobbled together from various sources (including, so often, US websites) may contain contradictions and technical language which is not appropriate to the actual deal. Generally, plain English is always best and if you don’t have an in-house contract specialist, it’s always worth asking you company solicitor to check the contract over for any gaps or snares.
Mark will be speaking at Mega Bite-sized – Business Law for busy people on Thursday 23rd June.