In this guest blog, specialist contracts and legal services expert BEB Consultancy talk about how to approach written contracts, hidden terms and reading the small print.
Thousands of contracts are entered into every day.
The party you are entering into a contract with may present you with their contract to sign and by signing that document, you are confirming your intention of executing the terms in the contract.
Before you sign, it is crucial that you read what you are agreeing to.
Sometimes it’s tempting to skim-read past all that small print, but it’s important to see whether there are any hidden nasties and to understand what is expected of you.
In some cases, you may not have any idea what the terms are or even what the contract looks like.
Entering into a new agreement with a customer is always an exciting prospect. Picture this:
You have sent your proposal and your customer is willing to accept. They return with their acceptance, for example a purchase order. You’ve attached your terms and conditions to the proposal, so surely you are in control, right?
Not always!
That purchase order is likely to have, in small print, the words: ‘This purchase order is subject to our standard terms and conditions’.
At this stage, often without knowing it, you’ve entered into what’s known as ‘the battle of the forms’.
The customer has not accepted your offer – instead, they have sent you a counter-offer.
Once you begin delivering the services on site as requested in the purchase order, this is considered an ‘acceptance’ of your customer’s counter-offer. You are now bound by their terms and conditions… whatever they are!
It is not uncommon for otherwise very careful people to glance over a contract and just sign it without really knowing what it obligates them or the other party to do.
BEB Consultancy
These secret terms will be binding on your business and they are so secret, you likely did not know they existed, you don’t know what they are and you don’t know where to find them.
What might you have agreed to?
- 90-day payment terms?
- Consequential and indirect loss?
- 5-year defects period?
- Cancellation periods?
- Unlimited liability?
The list is endless as to what could be hiding in that secret contract.
Whether you are presented with a contract to sign or with a purchase order that could bind you to the customer’s terms, you should always review it fully.
It is not uncommon for otherwise very careful people to glance over a contract and just sign it without really knowing what it obligates them or the other party to do.
Nine tips on what to look for when entering into a contract
- Negotiate the terms. Being in receipt of a contract is a starting point. You can negotiate the terms of any agreement. Ask for what you want, compare them to your own terms and see where there are any discrepancies. You want to make the deal happen, but so does the other person. The worst that can happen is they say “no.”
- Complete all blanks. Sections left blank should be completed, otherwise there is the potential they will be filled in later by someone else. It’s also a good idea to initial all changes or deletions on any pre-printed forms.
- Rights and responsibilities. It’s important to ascertain who’s responsible for what and who is liable if something doesn’t happen according to the contract. Never rely on an oral understanding as often any written terms will override these. Know all of your rights and responsibilities under the contract. Carefully read the entire contract for these because rights and responsibilities may not be contained in just one clause.
- Remedies provisions. No one wants to talk about the bad stuff, such as what happens if something goes wrong, but you need to consider these things to put necessary systems in place. How long do you get ‘to put it right?’ and determine what types of remedies you want if the customer has breached the contract?
- Risk of Equipment. Determine how risk is to be allocated. If you are leaving any of your equipment on their site, who is liable for it should it get damaged or stolen and from what point?
- Data Protection. Determine if the other party will have access to any of your information or personal data. If so, consider including a provision requiring them to handle and secure the information in a commercially reasonable manner consistent with applicable data protection laws, such as GDPR.
- Liabilities. Wherever possible, you should limit your liability – sometimes you may be able to limit this to the value of the contract. Make sure you know what the other party is liable for as well. You may not be agreeing to something that is fair on both of you.
- Causes for termination. Consider including ways to terminate the contract if something goes wrong and/or for convenience (without any issues arising) if it is not working to your benefit.
- Dispute Resolution. Determine how you want to deal with disputes. Having a clause laying out the process should there be a dispute can save you lots of time and money.
How can BEB help?
Here at BEB we are experienced in reviewing contracts and ensuring you are protected.
We can negotiate with the other party on your behalf, if we notice potential risks in the contract. This in turn prevents any nasties from potentially destroying your business.
We read the small print, so you don’t have to!
We offer a support package, where we can act as your legal representative to review, advise and negotiate any contracts with customers and suppliers on your behalf, assist with debt recovery, amend any existing contract documents we have previously prepared for you and answer any ad hoc contract questions and queries.
BPCA members will get an exclusive 15 hours of support over a 12-month period for just £99 + VAT per month.
That’s a full 5 hours for free on top of our usual offering.
NEXT STEP
Get in touch today and quote BPCA15 to get started.
info@bebconsultancy.co.uk
Source: Online