4 Good Reasons to Dust Off Your Standard Contracts
We look here at some important reasons for SMEs to dust off their contracts and sense-check them against current rules and regulations.
As advisers to a broad range of businesses in the region, we always find it surprising how regularly companies overlook the need to keep their 'stock' contracts periodically updated to reflect current rules and regulations.
Those documents (e.g. customer terms and conditions, supply contracts) often underpin the organisation's business and - because they tend to be used on a repeat basis - the effect of mistakes in those documents can be magnified.
We look here at a few recent developments which you should consider checking against your current contracts to avoid any pitfalls.
Brexit
We don't suggest that you try to second-guess the outcome of the Brexit negotiations, but we do recommend that your contracts give you the flexibility that you need to be able to deal with changes that Brexit might bring - particularly where you have EU based customers or suppliers.
Are your contracts clear where the risk of the imposition of tariffs might sit? Do you have the ability to re-visit contract terms if circumstances change? Particularly for long term contracts that might straddle our departure from the EU, you should think about whether they give your business the flexibility that it needs.
General Data Protection Regulations
These new rules are likely to mean that the terms of your relationship with consumers needs to be updated (in particular to reflect the new more stringent rules on seeking consent to process personal data). They will also affect B2B contracts under which personal data is processed.
The increased powers of the regulator in this area, and its ability to levy very significant fines, have focused the minds of most businesses on ensuring that their contracts and systems are compliant.
Modern Slavery
If you are required to comply with the Modern Slavery Act (i.e. your turnover exceeds £36m) then including appropriate provision in contracts with your supply chain helps to demonstrate your compliance.
Even if you aren't caught directly by the Act though, your customers may well be. They will look to impose obligations on you as part of their own compliance processes. Including terms in your standard contracts which you are comfortable with and which pre-empt the requirements of your customers should be low-risk, will be positively viewed by your customers, and will limit the need for negotiation.
Consumer Rights Act
Although now a couple of years old (implemented in 2015) many consumer-facing businesses still operate on non-compliant terms and conditions. Getting this wrong can result in your contracts not being enforceable in the manner in which you expect them to be, as well as potential censure from regulatory bodies and the reputational risk that goes with that.
Our experience, as advisers to businesses of all sizes in the region, is that keeping your key documents up to date helps to avoid future disputes, and is a good indicator to your customers and suppliers of a well-run business.