CONTRACTS - Half A Dozen Easy Ways To Stay Out Of Trouble

(Or how a few minutes spent now could avoid a lot of trouble later)


Know who you are dealing with 


1.         Don't use a company's "nickname" such as Virgin or GSK in an agreement - there are lots of different Virgin or GSK companies and they are all different legal entities.  Instead use the full corporate title of the company with whom you are doing business.  That will usually include the word Limited or plc at the end.


2.         Companies often change their name, but their number never changes, so the sure way to identify an English company is to include its company number.  You can check this at Companies House (http://www.companieshouse.gov.uk/) who have a free online Webcheck service.


3.         Many online terms and conditions adopt the user friendly "you" and "us", but turn out to be distinctly unfriendly when they use "you" to mean the company using their services and the individual employees of that company who log on to on online service.  Always distinguish between the corporate party to the contract and the individual "user".


Don't unwittingly get into a contract


4.         Most contracts do not need to be a formal written agreement; they can be formed simply by talking to someone and they can certainly be formed by an exchange of letters or emails. If you want to be sure that you are not entering into a commitment that is legally enforceable, make sure you make it clear at the start of the conversation or, if you are sending a letter or email, by clearly stating that it is "Subject to Contract".


Don't get into a contract unless you know how to get out of it


5.         It can be tempting to delay signing a contract until you are certain that everything is in place. Sometimes the rationale for the delay is that you can always opt out if you want to.  Beware, that rationale may well be false. If in the meantime you want work to start, the supplier starts work and the customer pays the supplier as the work progresses, there will be a contract, albeit not a written one.


The problem is knowing what its unwritten terms are.  If you want to pull out, can you? Or are you tied in for the duration? In any case, without a written contract how do you know what the duration is? 


Rather than have this sort of uncertainty, make sure that you have a written contract and that it has clear termination or break provisions if you want to be able to opt out.


6.                   People usually remember to include a termination clause that allows either party to terminate if the other breaches the agreement or becomes insolvent, but they often forget to include a clause that allows either party to terminate on X days'/weeks'/months' notice.  They think that the arrangement will be "evergreen".  No agreement or contract or commercial relationship continues forever. Either make the agreement for a fixed term - Y months/years (remembering to make it clear when the period starts to run) or include a clause that allows termination on the expiry of a period of written notice.


Contact Details

If you would like further advice about any of the issues considered above please contact Christine Reid on 01865 864195 or email her at christine.reid@northwoodreid.com.


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This article is not intended to be, and should not be taken as being, legal advice. The law often changes and it varies from jurisdiction to jurisdiction; the information in this article is generic in nature and specific legal advice should be taken before acting on any of it.


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