How to Negotiate a Commercial Contract
It's not worth rushing a commercial contract just to save time and/or money. Taking the time to draw up a comprehensive contract that will meet the needs of both parties will actually save you time and money in the long run. Here are some things you can do to have a successful outcome to your commercial contract negotiations.
Who are you negotiating with?
If you are doing business with a new client then you will need to ensure that you are satisfied as to their location and credit worthiness. Performing a credit check on an individual or company might mean you avoid ending up out of pocket if they fail to pay in the future.
If you are negotiating with a company, it is worth checking their address and registered number with Companies House (this can be done fairly cheaply over the internet).
Is the identity of the company or individual that you are dealing with crucial to the performance of the contract or are you happy for them to assign their rights to someone else? Permitting assignment is often an important negotiation point of a contract - many providers only want to deal with one party. Assignment can bring a higher price and more favourable terms for the contract provider. Conversely however assignment requires a high degree of flexibility and the ability to deal with different parties, of which may not suit your organisation. Either-way the terms of assignment must be made clear in the contract.
What is the purpose of the contract?
Irrelevant to whether the contract is for goods or services an adequate description of what is being sold should be provided so that the buyer is clear on exactly what they will be receiving.
If you are a commercial seller then you must ensure that any goods sold under the contract are of a 'satisfactory quality' and are 'fit for purpose'. Due to the Sale of Goods Act (1979) these requirements are automatically implied under the contract.
Any assumptions as to the quality of the goods or services which are bespoke to the contract should be documented as agreed by both parties. These assumptions will normally match whatever was negotiated upon at the point of sale. Money, what was the agreed price?
It is obviously very important that a price for the performance of the contract is negotiated and agreed before the contract is drafted. However when creating the contract you should try to detail any potential extra costs that may be incurred by the buyer. Be as open as you can with costs as this tends to be one of the main areas around which contractual disputes arise.
If the contract is for a large sum of money then a payment plan can be negotiated between the parties and this should be detailed in the contract. Specify dates upon which any deposit money should be paid and when each payment installment becomes due. You might also want to specify the preferred method of payment i.e. by cheque or bankers draft.
Every business should ensure that they have tightly drafted terms and conditions of business prepared by specialist commercial lawyers for every transaction - and should consider dedicated commercial contracts for large transactions.
About the Author
If you need commercial lawyers to provide business legal services in Salisbury, contact Bonallack & Bishop (http://www.bishopslaw.co.uk ). Senior partner Tim Bishop has grown the firm by 1000% in 13 years and has plans for its further expansion. He is responsible for all major strategic decisions and sees himself as a businessman who owns a law firm.
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