When you are given the responsibility of negotiating business contracts on behalf of your company there are a number of factors which you will need to take into consideration to safeguard your business.
If the contract you are negotiating is particularly large or complicated it would prove beneficial to seek the advice of a solicitor who can help you go through each aspect to ensure you don’t miss any important points or unwittingly bind yourself into an agreement with another company who perhaps aren’t as ‘above board’ as they initially appeared.
Due diligence before an important contract
First and foremost you will need to know a good deal of information about the company you are issuing the contract to or receiving the contract from. In some cases you may well have done business with them before and may never have experienced any problems but, in other cases where you aren’t fully aware of the other company’s background and have never had any dealings with them in the past it is advisable to do a bit of research to see if you can pull up any vital information pertaining to that company which may set warning bells ringing. It is also advisable to run a credit check on the other party involved.
You need to ensure that your company is fully protected and, if the other company is not based in the UK, making it far more difficult to track them down if something should go wrong, you will want to seek legal advice to find out where your company stands if the worst should come to the worst.
Sub-Contracting – potential risks and rewards
Have you chosen the company you wish to contract because of their specific skills, services or products or would you be happy for that company to sub-contract to a third party?
If it is the services of the particular company you are contracting which you require and do not wish the work to be sub-contracted you must state this clearly within the contract.
Be clear in the contract terms about what are you offering and getting
The other party involved will only accept the terms of the contract if they know exactly what they are going to get from you or exactly what you expect from them and vice versa. The contract must be concise and accurate, describing the goods, products or services you are offering or the services you require in as much detail as possible.
Any false claims, in legal terms known as misrepresentations, no matter how unwittingly made, can lead to disputes which could end up costing your company far more than the value of the contract itself.
Every aspect of the contract must be fully understood and agreed by both parties and any issues which may arise regarding the products or services being offered should be clearly explained within the contract.
Payment – obviously crucial including timing of contractual payments
The contract should also provide both parties with a clear understanding of how much the products or services are going to cost.
If you are selling a product you will need to make it clear whether the delivery costs for those products are included in the overall figures and should also state when the payments should be paid, your preferred method of payment and whether the payments can be made in instalments or whether the entire balance is required in full.
What happens when it all goes pear shaped?
In the event that a deal may go wrong you must take into consideration how this will affect your company and what losses may be suffered as a consequence.
You can give your company a certain amount of protection by including a couple of safety nets within the contract for example, if you are selling goods or products then make sure you limit your liability of possible losses to a fixed amount which goes no higher than the contract amount but, if you are buying goods or services, ensure that the other party involved accept full liability for any possible losses. Cover all bases and, again, seek legal advice all the way.
If you are a buyer you will need to make it clear as to when you want to receive your goods. Stipulate a delivery date and even add a clause within the contract which will impose a penalty on the other company such as a full refund or the voiding of the contract if the goods aren’t delivered on time.
State how long you wish the contract to go on for by either including a right within the contract which allows you to terminate the agreement by giving notice or by stating a fixed contractual period.
It may also be wise to consider some of the reasons which could result in you needing to terminate the contract immediately and including these in the contract as a further safeguard.
If you need help or advice negotiating an important business contract or require guidance on some of the terms of the contract, get in touch with me, I can help in a practical and cost effective way,
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