5 Things to Consider About Contracts
6th August, 2012
1. The best drafted terms of sale or purchase will only assist you if a dispute arises if they are incorporated into the contract. Make sure you tell the customer/supplier BEFORE the goods are delivered that these are the terms you trade on and beware of counter proposals coming back the other way asserting their terms apply. Referring to terms as being applicable on your invoices is too late as the contract is likely to have already been performed ie the goods or services delivered by the time the invoice is raised.
2. If you are selling goods on credit, ensure that your contract specifies that you remain the owner of any goods supplied until all goods you have supplied to that customer have been paid for. This will enable you, if you terms are incorporated (see point 1 above) to at least get the goods back if the customer goes bust and is unable to pay the price.
3. If you are holding goods that belong to the customer, consider including a lien in your contract. A lien is the right to hold property belonging to your customer (or sometimes certain third parties) as security for sums due from your customer. Applying liens tends to be quite complicated and is a matter you should take advice on if the need to apply the lien arises but it can enable you to exert pressure and get paid even when the customer goes bust so is worth including.
4. Include provisions setting out what each party’s liability to the other will be. Typically the buyer will want unlimited liability and the seller will want to limit its liability. Limitations and exclusions of liability are permitted subject to certain legal requirements and some exceptions ie you can not exclude liability for death or personal injury arising from your negligence. If you are selling goods or providing services then you will certainly want to limit your liability and your contract should be drafted accordingly.
5. If you are dealing with overseas customers or suppliers, make sure the contract is governed by English law and subject to the jurisdiction of the English Courts otherwise, if a dispute arises, you could find yourself in court in the other party’s country and subject to unexpected legal rules and language difficulties.
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