Guidance For Negotiating Supply Agreements
The sale of goods and services is a broad area that covers an array of potential legal and business issues. Generally, when you engage a supplier for business services or you are engaged by another for the supply of your services, it is advisable to set down service levels, amongst other things, to be achieved. It is also prudent to consider the consequences of failing to meet those service levels.
At Tinsdills, we have a dedicated team of business law solicitors who are able to draw on demonstrated experience in preparing and negotiating supplier agreements and advising on the risks involved for your business. More business services include:
Tinsdills recently expanded this department following an acquisition of Grindeys Solicitors
Trust Tinsdills With Your Supply Agreements
Negotiating a new agreement for the supply of goods and/or services can be an exciting time for your business. However, it is important to ensure your business is protected so far as possible (particularly when dealing with larger businesses and retailers). Many large businesses will have a standard supply contract that will inevitably be drafted in its favour. It is therefore prudent to ensure that the terms of the supply agreement work for you too or you are at least aware of any pitfalls and areas of risk.
The supply agreement will usually cover key terms such as price, time and method for payment, exclusivity or non-exclusivity, notice periods and termination provisions, delivery and logistics, regulatory requirements and service levels.
Our team of expert business law solicitors is on hand to prepare and negotiate the supply agreement that is right for your business and which mitigates risk whilst striking a balance between the parties.
Having a standard supply agreement may be useful but they are often fraught with danger. By their nature, standard agreements are very general and will not necessarily accurately capture the full extent of the parties’ intentions. Where the supply of goods or services is complex, or the value is particularly high, a standard supply agreement is unlikely to have the sophisticated terms and details to provide proper protection and mitigation of risk for the parties. A bespoke supply agreement will aim to ensure that the agreed terms are sufficiently accurate, reasonable and comprehensive to cover pertinent issues.
Penalty clauses are not enforceable under English law. However, properly drafted and considered provisions for liquidated damages may be included. Liquidated damages relate to compensation, at a fixed amount, which is agreed at the outset of the contract and which becomes payable in the event that a party commits a breach of the agreement, without the need to pursue a lengthy contractual claim. However, it is important to ensure that the agreed amount of damages represents a genuine pre-estimate of the loss suffered as a result of the breach. If that is not the case, the courts are likely to interpret such provisions as a penalty clause and therefore unenforceable.
We would always advise you to have a written contract in place to record the terms that have been agreed between the parties so that, in the unfortunate event of a dispute, the written contract can be used as evidence of what was agreed. That being said, oral agreements are generally enforceable (albeit often difficult to prove what was agreed between the parties in the event of a dispute), but it is important to note that there are a number of situations where a written contract is required by law or in order to fulfil certain registration requirements.
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