Are you thinking about entering into a contract with another business?
Do you have sufficient knowledge of contract law to successful negotiate with other businesses? The chances are the answer to the latter questions is probably not. Contracts may be a crucial part of every-day trading, but they can be fiendishly complicated matters.
One small error or omission can have very expensive legal consequences.
That’s why we would always recommend that you take expert legal advice and consult a commercial specialist like Harold Stock & Co Solicitors before signing on the dotted line. But is there anything you can do yourself to protect your interests? Is there any vital information you should find out before signing the contract? The following information may help:
Contracts from a buyer’s point of view:
It should always be borne in mind that businesses do not have the same legal protection as individual consumers, that’s why professional legal advice is imperative. In general, when any business purchases goods or services from another business, it should have the same implied rights as a consumer would when buying from the business.
However, although basic rights can’t be excluded from contracts with consumers, they can surprisingly be excluded from contracts between businesses. A consumer contract which excluded liability for defective goods would be automatically invalid. But there is an onus on the business purchaser to check in advance what terms and conditions they are agreeing to. Businesses should always be clear about the following points:
- They should check whether there are any terms or conditions in the contract that appear to be too heavily weighted in favour of the business supplying the goods or services.
- Look out for exclusion clauses which the seller might use to exclude certain liabilities from the contract.
- If any business is unhappy with any of the terms or conditions, they should not agree to them, but get them checked by a solicitor or contact their local Trading Standards office.
- Business buyers can take the initiative when negotiating contracts with your suppliers, and have certain terms and conditions amended or added to improve their position. Naturally this will depend on the buyer’s bargaining power and the amount of business they are agreeing to.
- Business buyers should use a solicitor to draw up standard terms of trade for key purchases of goods and services which they can enclose with the order to make sure it is agreed that your terms will apply; of course the seller must also agree to this too.
- The final contract should reflect what has been agreed in terms of quality, quantity, price, payment terms and delivery schedule.
- Buyers should insist on the removal of exclusion clauses limiting the seller’s liability for defective goods or for losses due to negligence.
- They should also make sure the goods correspond with the seller’s description, are of satisfactory quality – safe, in working order and free of defects and are fit for purpose.
All these rights are outlined in the Sale of Goods Act 1979. Similar implied contractual rights also apply when purchasing services. If one business purchases services from another business, the service should be carried out with reasonable care and skill, within a reasonable time and for a reasonable charge. These implied rights apply not just purchases, but also to hiring, hire purchase and part exchange. Sole traders, and those within a partnership or as an unincorporated association, are also protected by the Consumer Credit Act 1974, under which they are counted as an “individual”. However, the Consumer Credit Act does not extend to limited companies or LLPs.
How can businesses be sure they are effectively protecting their interests?
The easiest way of ensuring that your interests as a buyer are protected is by using the services of a qualified solicitor. A solicitor will ask all the relevant questions and will ensure that:
- When your business is buying goods or services, they will protect your rights under the implied terms. They can do this by asking for detailed product specifications. Even if the business knows a lot about the product, it is always better to make sure it asks lots of questions.
- When the order is placed, they will insist that the product must match the specification and state explicitly the quality levels and standards expected. Businesses should make sure they tell the seller what they will use the product for, and make sure they keep a record of claims by the seller. This can be done with brochures from the seller, and confirmation emails answering specific questions.
- When you get the product finally arrives it should be inspected thoroughly. No business should accept a product without a detailed inspection, as they may lose their right to reject it if a defect is found later.
- A business has a choice to make. They can either choose to examine the product thoroughly, or not at all. Either method can be sufficient to protect a business’ legal rights. Businesses should never sign a delivery note acknowledging the goods were satisfactory, until they have been examined thoroughly.
- Ideally buyers should put the onus on the seller, and ask them to inform you of any hidden dangers, limitations or quality charges.
- Finally, if a buyer needs a particularly delivery date or time, it is important to make sure this is confirmed in writing.
If you would like more information about business contracts, call Harold Stock & Co Solicitors on 01457 835597.