Starting a new commercial relationship can be an exciting and busy time. While it is important to sort out the practical issues like new processes and setting up supply chains, the importance of well thought out contractual terms cannot be overstated.
Getting this right is a valuable tool in mitigating risk and maintaining efficiencies. Tim Lane, solicitor in the corporate team at Stephens Scown, outlines the key questions that you should think about.
What is the business being asked to do?
Confusion over the scope of the “ask” is a common cause of disputes. An objective and comprehensive specification of what is to be delivered is a must.
What assumptions are being made?
If the contract is being accepted on the basis of certain assumptions, such as that the customer will provide certain information or allow access to their property, these should be included.
How and when will payment take place?
Appropriate provisions setting out when a business can expect to be paid can greatly assist in maintaining cash flow, and in dealing with non-payment.
How is risk being apportioned?
A party’s willingness (or otherwise) to assume a particular risk will often be an important part of the commercial arrangement on the basis that if a party expects to be absolved of particular risks, there may well be a cost implication of this.
How will the contract end?
It is important to be able to identify the point at which a party’s obligations will come to an end.
Are there any other requirements?
Certain sectors, such as consumer credit and information sharing bring with them particular legislative requirements which need to be borne in mind.