Not having a robust contact in place when entering an agreement can clearly cause untold damage to the business if things go wrong. Some things you need to consider:
- Is your contract worth the paper it isn’t written on? A contract need not be in writing to have legal effect and can be made orally or in writing, including by email.
- Are your negotiations really ‘subject to contract’? To avoid doubt during pre-contractual negotiations this phrase should head all correspondence and emails, including attachments and enclosures.
- Do you know what you are agreeing to? Aim to ensure that all of your contracts are in writing, so that both sides are clear on what they are agreeing to do.
- Whose terms and conditions apply? If acceptance of an offer by one side does not match the terms of the offer, then this amounts to a rejection of the original offer, so that no contract exists.
- Is it reasonable to use my best endeavours? The full implications of this term is often misunderstood. In particular, consider your financial exposure. Any limitations on obligations should be set out from the start.
- Promises, promises During the negotiations some of what is said will have no legal effect, so don’t get carried away by sales talk which doesn’t translate into reality.
- Limiting liability – say what you mean or pay the price The courts will not step in and redraft a poorly drafted contract. If a party attempts to limit or exclude its liability, it must do so clearly with no ambiguity.
- Warranties and indemnities A warranty is a contractual promise, which if found to be untrue may give rise to a claim for damages. Warranties and indemnities potentially have wide ranging implications and should not be taken lightly.
- When things go wrong – can you terminate? If you wish to walk away before the conclusion of the contract you’ll need to look at the specific terms. Most contracts specify either a fixed term or a notice period to terminate; sometimes this can only be given within a certain window, so ensure that opportunity is not missed.
- And finally… who are you dealing with? This advice is for business to business contractual relationships. There are additional important factors to consider when dealing with consumers, governed by an extensive body of consumer protection law.
This is intended as brief checklist of some of the considerations when entering formal agreements and negotiating contracts.
