Limit your exposure – not just to the sun!
The great British Summer is here (if you ignore the odd rainy day). Barbecues are out, legs and toes are on show and we are reminded daily to limit our exposure to the sun. You readily slap on the Factor 30 and cool designer sunglasses, but do you take the same care when entering into business contracts to prevent your wallet getting burnt?
Here are some top tips to ensure you are not overly exposed in your contractual arrangements:
Time is of the Essence
It’s a lovely phrase but it has a real sting. If time is of the essence for delivery of goods or performing a service, then even a small delay will be grounds for terminating the contract. That makes it easy for a customer to walk away if their own situation has changed or even just haggle over the price you thought you’d agreed. On the other hand, if time is of the essence for exercising one of your contractual rights, you may well lose the right if you don’t exercise it within the time set. So, think carefully about accepting a ‘time of the essence’ clause – unless it relates to you getting paid!
A promise to be responsible for another’s loss as a result of something you have done. Indemnities cover specific matters such as breaches of intellectual property or data protection provisions but they can often be more general by making you responsible for losses which arise due to any breach of contract. The correct use of an indemnity should be to allow parties to remedy a specific situation where a party should not have to bear a particular loss; they should not cover general breaches of the contract. Beware of indemnities and make sure that if you do agree to them, they are specific and not general.
Limit your Liability
There are various ways of limiting your liability in a contract; setting a limit on the amount recoverable and excluding remedies that would otherwise be available. As a Supplier you need to make sure you limit your exposure. Every contract you sign should include a reasonable financial cap on your liability. If your customer wants you to accept a higher level of risk then adjust your pricing to accommodate the additional risk.
Read the contract
It might seem obvious, but read the contract: don’t just assume you know what it says. Be aware of your obligations and don’t be afraid to ask for the contract to be amended if it doesn’t set out correctly what you have agreed.