Better than a handshake

Just because your business has weathered the recessionary storm, the risks have not subsided.  The recovery remains patchy at best with many companies struggling to maintain their performance, let alone contemplate measurable growth.

Such a backdrop has caused unprecedented change throughout many industries, taking with it casualties along the way.  Should those casualties extend to your own customers and suppliers the problems quickly become your own.

Tight credit control and regular risk assessments all have their place but ultimately your trading relationship rests on your contractual arrangements.  But these need regular care and attention to ensure they work for you in the best way. 

With many time honoured business arrangements resting on little more than a handshake few consider what would happen if your key customer or supplier were to hit a problem.  This need not be as extreme as a complete business failure, since a decline in product quality, poor service, delays, or missed deliveries can all be disruptive.

Even if you always trade on a your standard form terms and conditions you may have put these together when your business was much smaller, or worse still, you may have borrowed some that sounded sensible at the time.  Like all business arrangements, you must review these from time to time to ensure they remain appropriate.

All businesses are at risk from bad debts.  Your agreement could require a deposit with each order received, or a parent company or personal guarantee.  It could also incorporate a quality threshold, specific delivery times and other performance criteria.  In some cases it may be possible to limit your liability if your trading partner believes you are in breach of your obligations.  But it is extremely difficult to include any of these factors unless they appear in your agreement.

A well drafted commercial contract provides both sides with certainty.  It can incorporate industry specific arrangements and can be as restrictive or as flexible as is appropriate.  With such a contract in place you can concentrate on building a profitable relationship safe in the knowledge that should problems arise the basis of your agreement is certain.

Ultimately you can choose to invest in a well drafted agreement, or risk an expensive and lengthy court battle later on.

For a thorough review of your business terms and conditions and commercial contracts, or to establish a new agreement, call Edward Garston on 01245 216110.