Practical Pointers for the Imperfect Reality of Contracting with Your Customers and Suppliers
We all know what a contract looks like, don't we? Carefully drafted, signed by the parties, dated and completed well in advance of any work starting. Our clients tell us that life isn't always like that.
The reality - despite the very best intentions - is that all organisations will sometimes fall short of that best practice. Below are a couple of common conundrums, and our suggestions for dealing with them.
We didn't finalise the contract terms - we just got on with delivery. Do I have a contract?
Quite probably, yes you do. It is perfectly possible for all of the constituent elements of an enforceable contract to be in place, without having a written, signed agreement.
If both you and the other party have been behaving in a way which is consistent with you each owing obligations to the other, then there is a good chance that an enforceable contract has come into existence.
However, identifying what the terms of that contract are is much more difficult.
So I have a contract - what are its terms?
If you've gone to the trouble of negotiating a contract, and although you haven't got around to signing it yet both sides are working in accordance with its terms, then the chances are that you have contracted on those negotiated terms.
If, on the other hand, neither you nor the other side ever really turned your mind to the terms - you just agreed a product and a price - then the contract terms are unlikely to amount to much more than that product, the price, and any terms which the law implies into your contract.
Don't fall into the trap of assuming that you will both be deemed to have contracted on reasonable or sensible terms. If you've clearly agreed to a term (e.g. to a price) then that will form part of your contract. If you've not addressed your mind to something (e.g. limiting your liability) then you almost certainly won't have protected your position in that regard.
A few tips
Ensuring that you have clear processes for engaging with customers and suppliers, which are well-understood by your staff, should reduce the risk of your business 'sleep-walking' into a contract on uncertain terms.
You should ensure that staff who may be responsible for engaging with customers and suppliers only do so on an approved, risk assessed basis. Consider what are the key terms that you need in all contracts, and ensure that your teams are clear as to the need to secure those terms.
Finding yourself in a position of having contracted on unclear terms can be a risky business, resulting in dispute as to what the contract terms are, and potentially leaving you unprotected in key areas. Ensuring that your staff follow clear processes as to how they engage with customers and suppliers, and that there are sensible and clearly understood limits on their authority, should help you to limit that risk.