Tips to avoid contract difficulties (Part 1)

Drawing contracts can be such a pain especially for entrepreneurs and those that are looking to form a limited company, who already have too much on their plates.

But you don’t need a degree in law to avoid some of the main obstacles and challenges that one meets when it comes to contracts. Here are some practical tip on how you as a business owner can protect your legal position:

• Do not start work on anything unless you have already received a signed, written agreement. You can be put in a much stronger position both legally and commercially if you show a contract selling exactly what has been agreed on –the product, the price, the work needed to be done, etc.
  If you are going to deal with larger organisations ensure that the person who is going to sign the contract is authorised to do so. Always mark all draft documents as “subject to contract” up until the moment you are satisfied with the terms.
• Think about what you want to see in the contract as early as possible – preferably at an early stage of negotiations. Usually, in the frenzy of negotiations (for example, in prices) other more important issues could be completely forgotten like termination rights or things that should happen if things go wrong.
• For people who are looking to form a limited company soon, a contract should clearly contain what kind of work will be involved. Don’t assume that since this part of the project is obvious you will not think about it. Here are other things that you might want to include:
• All the relevant details of the location where the work is going to be carried out
• Quantities, measurements and all of the other technical specifications
• The minimum standards goods or services must meet (this could mean relevant industry standards)
Buyers should also make sure that the contract explains the purpose of the goods or services. The contract should also refer to any special or unusual requirements (for example, a clause that a certain product must be proven to be compatible with other existing products).
• Meanwhile here are some questions to ask about from both the perspective of the buyer and of the supplier:
  When should the project be finished?
  For buyers – Indicate if it is important that work be done by a certain time, put it in the contract that time is essential (or that “time is of the essence”) so that when the supplier fails to deliver on time, this may allow you to terminate the contract and find another supplier.
  For suppliers - Unless you are confident that you can deliver within a certain time frame, you must resist any attempt by the buyer to have a “time is of the essence” clause in the contract. You should make it clear that any delivery dates are just estimates.
  
  (To be continued)

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