Tips to avoid contract difficulties (Part 2)

The second part of our article on how to avoide contract difficulties continues with a series of questions answered from the perspective of both the buyer and the supplier:

What would be the cost?

For buyers – The best option is to agree on a fixed price, with the bulk of the payment to be payable only after the work has been done to your satisfaction. Double check to see if the price already includes everything you are expecting to pay and that the supplier cannot charge you for any hidden extras like travel reimbursements or delivery charges.

For suppliers – You will have to clearly stipulate in the contract if you intend to charge extra for VAT, delivery charges or any other fees on top of the agreed upon cost. Try to agree on installment payments that are payable as work progresses. This is an especially good idea if you have particular concerns about a customer’s ability to pay. Clearly state that the time for payment is very important and also state that you are entitled to stop work if the buyer fails to pay you on time.

What are the warranties?

For buyers – make sure that the contract contains promises (otherwise known as warranties) that any products or service are of “good quality” and also fit for their purpose. Also, any services will be supplied with reasonable skill and care.

Although the warranties are very normally implied into the contract by law, suppliers are sometimes allowed not to include them. It is for this reason that it would be a good idea to have them written down in the contract.

You should also compel the supplier to include a warranty that they will replace or repair any faulty goods. If you don’t do this you may only be able to claim financial compensation when what you are really aiming for is to have the faulty goods replaced.

For suppliers – Do not think that you can get away with a contract that does not include any warranties about the quality of your goods and services. But you must also remember not to make promises about meeting standards that you know are beyond the capabilities of your business.

As a supplier it would be worth including statements like “All other warranties, whether express or implied, by statute or otherwise are excluded to the fullest extent permitted by law”. If you are a product reseller look at the warranties that are given by your own supplier regarding product quality. Always remember to avoid promising anything more than that in contracts with your clients.

What is something wrong happens?

You should think about any eventualities, especially about what should happen if events don’t go according to your plan. If the supplier’s delivery gets delayed should the buyer have the power to terminate the contract? If a stipulated project is discovered to be more expensive than initially thought, who should bear the extra cost? Dealing with these issues early enough in the contract you can reduce your risk of getting into any legal disputes that are not only costly but also time-consuming.

Suppliers should always ensure that they limit their liability to their customers in the event that something goes wrong. Any exclusion or financial limit of liability is normally expected to be reasonable.

Business Issues
Business Plan
Countries
Finance
Marketing
Start up
Strategies
Taxation
Technology


Back