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Contracts in Business Part 2

Contracts: 5 things to think about (Part 2 of 2)

Contracts: 5 things to think about (Part 2 of 2)

In a previous post I said contracts could be quite complicated, but they came down to 5 key questions: 

Who is going to do what, for whom, when and for how much

I looked at the first two of these: who? and what? and at why they are important.

In this post I want to look at the other three: for whom? when? and for how much? and at why these are important too.

For whom? may seem a less obvious question to ask.  Or at least the answer may seem obvious. Who and what are perhaps more obviously key.  

But let’s say I’m a would-be buyer; I want the goods or services, so I’m going to be the buyer, aren’t I?  Well normally, yes, but perhaps not always.  If I’ve got a group of companies, for example, then it may be better for one member of that group to buy something rather than another. 

Or again consider this.  I was once acting for an NHS hospital, and they wanted to make an arrangement with some of the doctors who worked at the hospital.  The problem was there were various things (mainly regulatory issues) that were making it difficult, perhaps impossible, to do what they wanted to do.  What could they do? 

Well, we were able to suggest that (instead of the hospital itself) it was a hospital charity that made the arrangement with the doctors.  The same result (broadly at least), but arrived at through a different organisation.  The doctors would do what the hospital needed, but they would do it for the hospital charity rather than the hospital itself.

When? is obviously important.  The contract needs to say when it will be performed.   And, if the timing is critically important, it should also make it clear too that “time is of the essence”, meaning that timing is crucial to the contract, so that if the time-scales are not met you can cancel the contract.   If I need something before Christmas, it may be no good if it arrives in the New Year. 

For how much?  Whether you are the buyer or the seller, it’s good to know how much you are going to have to pay, or the amount you can expect to receive.  Ideally perhaps this means a figure.  If I’m buying 1000 widgets and the contract says they are going to cost me £500, everyone knows where they stand.  But of course this is not always possible.  Sometimes there are uncertainties, and there might be risks in agreeing a fixed price.  Maybe my materials costs are going up, so I agree with my buyer to charge for them separately at the going market rate.  But if it’s not possible to agree on a price at the outset, the contract needs to be clear how the eventual price will be determined.   Otherwise there is uncertainty, and uncertainty is always likely to lead to disputes.  How much is very much key.  It doesn’t have to be an agreed figure, but there does have to be a way for an agreed figure to be determined.

If your business needs advice and support, please contact Adrian Chaffey, a specialist Corporate Lawyer in the team at Kerseys Solicitors in Ipswich on tel:01473213311 or Kerseys Solicitors in Colchester on tel:01206584584 or email us at [email protected], alternatively you can visit our web site and click “Call Me Back” and a member of our Commercial team will be happy to contact you.

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