Contract negotiations: key issues

Barry Riley

Barry Riley

This article considers some of the key issues which you may need to consider when negotiating contracts, and should be viewed as a starting point, rather than an exhaustive list. You should ALWAYS take legal advice when negotiating a contract:

Who is the other party?

– Do you know them? Done business with them before? Are they based abroad (and does this pose any risks)?

Is the identity of the other party important to the contract’s performance?

–  Do you want/need specific individuals to perform the services? Can they sub-contract some or all of the work? If a company, what if the ownership changes (i.e. what if a competitor took control)?

What are you buying or selling?

– Most contractual disputes are about what services are to be performed or goods to be delivered. Ensure they are clearly defined, with no room for ambiguity. Ensure important issues and assumptions are covered contractually. Do not rely on verbal assurances. List what each party should/should not be doing, and make sure this is clearly defined.

Price

–  What is the price? How will it be determined? Are there delivery and installation costs? How must payment be made? When is it due? To be paid in instalments? If so, set these out clearly.

What happens if things go wrong?

–  What could go wrong? What loss could you suffer? What are the consequences?

–  If buying, ensure the seller is responsible for all losses and that liability is not limited in any way; if selling, try to limit liability to a fixed sum; damages for breach of contract may be far greater than the contract amount and impossible to quantify.

–  Take legal advice before agreeing any clause that seeks to limit liability under a contract.

Time

– Is the deal time critical? Is there a clear timetable set out? Will there be financial penalties if work or goods delivered late?

In what circumstances might you want to pull out of the contract?

–  How long do you want to be tied to the contract? Can you set a fixed period of time or do you need the right to terminate by giving notice to the other party? Are there any circumstances where you may wish to terminate the contract immediately; i.e. if the other party goes bust, damages your reputation, etc?

Branding

– Are there any brand, copyright, intellectual property issues? Is the other party creating something specifically for you? Their brand or yours? Who owns it?

– Make sure you take legal advice to ensure the correct formalities are followed, otherwise valuable assets may be lost.

Payment, performance or enforcement risk?

– Remember, if anything goes wrong, the protections in a contract are only ever as good as the person giving them. If they have no money, it will be very difficult to get any compensation from them. Consider requiring security (i.e. a guarantee or retention).

Are you dealing on standard terms?

– Most companies have standard terms of business drafted in their favour. If yours conflict with theirs, you will want to ensure that it is your terms which apply.

– Be wary of purchase orders or delivery notes – these can have a party’s standard terms included on them. By signing them, you may inadvertently commit yourself to the seller’s terms.

– Always be clear about the terms on which you are dealing. If in doubt, take legal advice.

This checklist may barely scratch the surface on some occasions, but proves to be a good starting point on which to build, when negotiating contracts. It is always advisable to get professional advisers on board early, so they can assist you as necessary, and ensure maximum peace of mind for you through any negotiation of a contract.

For more information about this checklist, please contact Barry Riley on 0117 9453 042 or briley@metcalfes.co.uk

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s