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Commercial FAQs


I have a business and I can do commercial deals. Why do I need a lawyer?

You may not. However in our experience taking advice about a transaction, even before negotiations have begun, can pay dividends later. This need not be a long or expensive process. However, we are frequently asked to help clients to sort out problems with all sorts of 'business relationships' where some simple advice would have set the transaction up in a way which would have avoided a problem or dispute arising.

Am I safe to take some general terms and conditions I found on the internet and use these?

The answer to this question is nearly always 'no'. General terms and conditions which might be used by any business are, by their very nature, going to be general and in some cases ambiguous. The most effective approach is to adopt terms and conditions of business which are (a) tailored to your own business and (b) reviewed regularly. The cost of settling the terms and conditions is a hugely worthwhile investment when you consider the safeguards that can be built in, the risks that can be managed, and the liabilities which can be excluded and reduced by a good set of terms and conditions.

Do I need a long contract?

It is often not necessary to have a long and comprehensive contract. However, businesses must understand the implications of this. A business transaction can be sealed by a spoken agreement or a short written summary of terms. This might be acceptable if the transaction involves buying a cheap second hand photocopier, but might be thought too risky if the transaction involves, say, acquiring the business of a major trade rival.  Typically a shorter agreement takes more on trust and inevitably has more risks attached to it. A longer and more comprehensive agreement reduces the risks involved but leaves less to trust. Either of these approaches might be appropriate depending on the transaction and the individuals involved.

I have a website so I’ve started selling through it. Can’t I just do everything exactly as I do on the shop floor?

In principal the law applies to cyberspace just as it does to the real world. However, there are certain extra requirements, often EU-driven, with which you will need to comply on the web. There are also many practical considerations to be taken into account when doing business, as well as often dealing with a third party to set up a suitable section of your website.

I have no bargaining power anyway, so what is the point in taking legal advice on a contract that I can’t change?

You will never know whether a term in a contract is non-negotiable if you don’t try. We can assist by negotiating on your behalf or suggesting mutually acceptable alternatives. Even if you have to accept a provision, it is always wise to understand fully its potential consequences and take advice on the extent of any risk before you take it.

As a seller of goods, how can I protect myself should my customer become insolvent?

You could use what is commonly known as a retention of title clause. The object of such a clause is to give the seller of goods priority over secured and unsecured creditors of the buyer if the buyer fails to pay for the goods because it is insolvent, or for some other reason which may be specified in the clause. As with any other term, you must ensure that it is fully incorporated into the contracts that you enter into. Should a buyer be a company in administration then you would require the permission of the administrator or the Court before you could repossess any goods that you had effectively retained title to.

How do I ensure that my Terms and Conditions (Terms) are incorporated into the contracts that I create?

If your terms are incorporated into a document that is then signed by the other party, then these are generally regarded as being incorporated. Commonly, this is not the case; therefore you will need to bring your Terms to the attention of the other party as soon as possible and certainly before the contract is entered into or performed (by placing them on your website, in brochures, on the reverse of quotations).

My terms and conditions are detailed on the reverse of the invoices that I send out, is this sufficient for them to be incorporated into my contracts?

Generally, by the time an invoice is raised the contract has been entered into and performed, therefore this will be too late. If there is a course of dealing with a particular customer then you may be able to argue that your terms have been brought to the attention of your customer over a period of time

Do I have to pay a fee to an agent upon termination of a commercial agency?

The starting position is probably yes, but this is dependent upon a number of factors:

  1. Do the Commercial Agents Regulations/ Directive  apply? Generally these will apply to agents within the UK/EEA where the agent is afforded some right of negotiation with the customer in respect of the Principal’s products and where the ultimate contract is for the supply of goods;
  2. Whether the payment is precluded due to certain factors such as a breach of the agency agreement by the agent that has resulted in its termination by the Principal, whether the Agent has terminated for a reason other than age, illness, or reasons attributable to the Principal;
  3. Whether the agent makes a claim – it has up to one year to do so.

Is it possible to cap the termination payment upon the conclusion of a commercial agency?

For EEA  based agreements you cannot contract out of making a termination payment, however, the agency agreement should stipulate that the payment is made on an indemnity basis as opposed to a compensation basis. This means that the payment is capped at levels set out in the regulations.

I have recently been sued for the consequential losses resulting from a breach of contract, is there any way that I can limit my exposure in the future?

Consequential loss is loss which arises due to, for example, special risks or from a failure to obtain an unusual anticipated profit. For example, consequential loss can be the loss of a contract your customer would have secured had you supplied the goods on time. If you could reasonably be expected to foresee the loss at the time you entered into the contract, then you can be liable for it. If the loss was unforeseeable, for example, the customer did not tell you about the contract they had lined up and you could not be expected to guess there was one, you might not be liable.

Beware that loss of profits is not consequential loss. However, your insurer may refuse to cover loss of profits too, in which case it is necessary for you to exclude liability for consequential loss and loss of profits. It is safest to define what you mean by consequential loss.

Most insurers refuse to insure against consequential loss. Therefore, you should usually exclude liability for it to the extent that you can.

I have sold and supplied goods to a business. My quotation included my business's standard terms and conditions however the purchaser is arguing that its terms and conditions apply to the contract between us; its terms were on the back of its purchase order.

If you have not communicated your terms and conditions to the purchaser (say on an acceptance of the purchase order) then it is likely that your purchaser's terms and conditions will apply to the contract between you. This is what is called the battle of the forms.

The general rule is that the party who gets the final shot in (i.e. sends a communication including its terms and conditions) before the contract is formed, will find that its terms and conditions are the ones that the contract is formed upon.

I have signed a supply agreement which I would like to get out of, is there anything that I can do?

You should consider why you wish to terminate the agreement: is the other party in breach for example by not paying its invoices, or not supplying goods or services to you on time? Are the goods faulty or services not of an expected standard? Alternatively you may have a commercial reason for wishing to terminate.

A well drafted agreement will provide the parties with various rights of termination. Typically these will include a right of termination on notice after a certain period, or should a certain event occur, for example insolvency, material breach (i.e. a breach that cannot be remedied, or not remedied within a certain time) or a series of breaches over a certain period of time. If the other party is caught by any of these provisions then you may be able to terminate on this basis.

If no termination provisions apply (which is unusual), or you find that you do not have a right to terminate then you would have to prove a right of termination, for example by asserting that the other party is in breach of its obligations to you. Should you have no contractual or other right of termination, but wish to remove yourself from its obligations for a purely commercial reason, then you may be able to negotiate a way out with the other party, however this may include some form of payment in settlement of your contractual obligations.

Talk to us

Lupton Fawcett is a leading commercial law firm with offices in Leeds, York and Sheffield. We provide commercial contract law services to clients across Yorkshire and the UK. Contact us today to find out how we can help your business.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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