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How to deal with your Business Contracts

This article highlights some issues a business should consider during contract negotiations.

Who is the other party to the contract?
  • What is the reputation of the other party? Has the company done business with the other party before?
  • Consider doing a credit check if the business has not dealt with the other party before.
  • Is there any other party that is vital to the deal? If so, consider whether they should be made a party to the contract so they are also bound.
Is the identity of the other party important to the performance of the contract?
  • Are there specific individuals that the business wants to perform the services?
  • Is the business happy to allow the other party to sub-contract some or all of the work or pass on the benefits of the contract to others? If not, this must be made clear in the contract.
  • If the other party is a company, would the business object if ownership changed, for example, if a competitor took control?
What is the business buying or selling?
  • The majority of contractual disputes relate to what services are to be performed or goods delivered
  • Describe the goods and services as clearly and accurately as possible to avoid risk of disputes.
  • Any important issues and assumptions should be confirmed in the contract. Do not rely on verbal assurances or points agreed during negotiations.
  • List what the other party should and should not be doing regarding the services or goods being sold under the contract.

What is the price and how is payment to be made?

  • Is it a fixed sum? If not, how is it to be determined?
  • If the price is linked to variable factors, what are the mechanics for determining the price and at what points during the term of the contract will the price be determined?
  • Is tax included in the price (notably VAT)? Take tax advice if goods or services are being delivered or performed in a foreign country to ensure there is no unexpected tax liability.
  • What are the delivery terms? Are delivery costs included in the price?
  • How is payment to be made (for example, cash, electronic bank transfer or bankers’ draft)?
  • When is payment due? Is it a single lump sum or by instalments?
My next blog deals with what happens if something goes wrong, ending the contract and other practical tips for agreeing a contract.
Please call if you would like some advice about a contract you are thinking of entering into, the call is free and without obligation.   Call Jane Latham: 01225 287516



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