Your business contracts should act in your best interests and if you don’t review them regularly they can quickly become outdated. When this happens you can find yourself unprotected in terms of litigation, loss of revenue and reputational damage. Your business contracts should be ‘fit for purpose’ at all times so build in contract reviews at regular intervals to ensure that your contracts work for you and not against you.
Changes to law and regulations
As a business person, your understanding of the key principles of contract law are likely to be relatively sound. That being said, the modern marketplace is now a diverse place. If your sales are predominantly online, your business contracts need to fully reflect the relatively recent consumer contracts regulations and you need to have provision for the data protection of the information provided by your customers.
By way of example, in one fell swoop the Sales of Goods Act, Unfair Terms in Consumer Contracts Regulations and the Supply of Goods and Services Act were superseded by the all-encompassing Consumer Rights Act 2015 which became law on 1 October 2015. As a matter of law, there are certain principles within this act that cannot be excluded by your own business contract, no matter what it says. This is still relatively recent legislation and as such, it’s quite possible that many businesses have not seen fit to amend their carefully drafted contacts to reflect the same.
Changes to your Business
The contracts that were drafted for use in your business at its inception might not reflect your business activity as accurately as they might do. If things have gone to plan, your business will have grown, in sales, staff and bespoke expertise. You might have developed your own intellectual property or copyright which you should look to protect. The bigger and more complex your business has become, the more risk is entailed in its operation. Minimise those risks by reviewing your business contracts. For example, you might want to introduce a limitation to your liability if your products or services fail.
If your business has grown, assess whether your original terms and conditions reflect your selling practices. You might have previously done all your sales face to face but you now operate an online function or telesales element. The point at which a contract becomes legally binding in these circumstances is no longer so clear cut. Consider what kind of industry you are operating in – very few these days are not subject to ever-changing industry compliance standards.
As well as an increased customer base, a growing business is likely to be engaging with more (and potentially bigger) third parties. Do the payment terms in your contract with your supplier compliment your customer contract terms or could it act to undermine your cashflow at a crucial time? Have the relevant warranties around a product supplied been passed on adequately to your customers or have you left yourself open with further unexpected liabilities?
Your business contracts with third parties need to cover more than the basics of payment and delivery. The relevant points to cover will vary enormously but by way of example, have you ensured that your contracts cover how contractors will handle customer confidential information. Do these third parties warrant in your contract to hold relevant qualifications required by industry or the requisite insurance? Does your business enjoy a degree of success that you are considering selling it entirely? If so, would your contracts stand up to the required due diligence or would they be considered outdated and scupper a profitable sale?
Your contracts should protect your business and promote its growth whilst affording your customers the legal protection they are entitled to. A regular contract review of your most important documents ensures that they are working for you and not against you – don’t wait for others to find fault with them.
Hannah Newell, Corporate and Commercial Lawbrief.
The LawBite contract review service delivered by expert regulated and insured lawyers starts from just £99+vat. For further information on your contractual obligations, you can consult with Hannah or any other of our commercial specialists by submitting a legal enquiry here.