CONTRACTS - Ignore these at your peril!



In our daily lives we enter into numerous contracts – some written, some orally and some unknown to us. It could be as simple as ordering goods online on Amazon or as complicated as signing a mortgage agreement for the purchase of a property. It is crucial to always read a contract before you sign it.

A neighbour informed me the other day of a problem he had had with a builder this summer. He had agreed some works with the builder on a buy- to let property prior to going on holiday. On his return from holiday, the builder had refurbished the house as agreed but had not carried out any of the garage works. When asked, the builder replied that the contract was solely for the house refurbishment. The contract signed by the neighbour showed that the money he paid his builder was solely for the house refurbishment. The neighbour was adamant that the sum he had paid was for the refurbishment of the house and the garage but he had no evidence to prove it.

He had signed the contract provided by the builder but admitted that he had not read it.

All businesses enter into agreements. Any business person must understand the legal basics when it comes to contracts. An honest contractual mistake can cause problems.

What is a Contract?

A contract is a written or oral agreement (ie a commitment, an undertaking, an arrangement) between two or more parties that is intended to be binding and enforceable in law.

A few points for starters

1. Failure to read a contract is not a defence in law. Always read a contract before you sign it and ensure that you are happy with what has been agreed.

2.Carefully identify the parties to the contract. If you are dealing with a limited liability company or a corporation ensure the contract is signed by a director or by someone with authority to bind the company.

3.To avoid misunderstanding, carefully define what each party to the contract is required to do.

4.In some instances, you may need to define what each party will not do to ensure each party is on the same wavelength.

5. Be clear as to the payment of funds – always arrange for payment to be made in staged instalments.

6. Be aware of remedies in the event of a breach of the contract.

7.If you are not happy with a contract that might have financial implications for your business always get a contract lawyer to check it out before you sign.

8.If the contract is a long-term contract, for example 3, 4 or 5 years think carefully about what could go wrong in the course of the contract. Always try to have a "get out " clause if it turns out to be a bad deal.

9. Ensure that you have a resolution of disputes clause. Be careful of mandatory arbitration clauses. Whilst arbitration clauses may appear to be a quicker way of resolving a dispute, you may find that by agreeing to the arbitration clause you have also agreed to pay or contribute to the costs of the arbitrator so you may incur additional costs and also lose (at least initially) the right to a trial in your local county court or the High Court.

10. Always read the small print – it pays to pay attention to detail.

11.Be careful of "standard term" provisions in contracts especially those contracts downloadable online. No two circumstances are the same. A contract must be tailored to fit the facts and your unique circumstances.

Just make sure that you bear these points in mind.

And remember, if you need help or want some advice on a contract or any business legal matter do call us (telephone no 01234 834620/01234 834621) or email Eve Jarrett at .e.jarrett@purebusinesslaw.co.uk.


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