The dedication in my book on collateral warranties is to my mum “who taught me everything I know about tender loving care (but knew nothing about tiny little contracts)”. Here’s the story behind that book.
#GetYourTLC
I get really frustrated when buyers use contracts to impose their supposedly superior commercial power on their suppliers – as if they weren’t getting something valuable in return! Here’s my top 10 nasties to avoid:
- One-sided flexibility: Wide rights for the buyer to end the contract at any time for any reason and not compensate their supplier aka termination for free.
- No right to finish: Wide rights for the buyer to omit any or all of the scope of the contract, instruct another supplier to do this and not compensate their supplier. It’s completely contrary to the supplier’s right to finish.
- Undermining commerciality: Wide rights for the buyer to deduct sums from invoices, often across projects, and without having to give proper notice or specifying precisely the basis for that deduction. Payments should be fair and prompt.
- Unexpected guarantees: Requiring the supplier to guarantee that its completed scope is fit for a specific purpose. This is a strict liability clause and covers meeting incorrect international standards, doing the impossible and ensuring a specific design-life.
- Unquanitifiable risks: Requiring the supplier to take responsibility for unforeseeable risks such as Brexit, pandemics or ground conditions, without giving it an opportunity to carry out a proper risk assessment.
- Added friction: Requiring the supplier to provide endless paperwork or documents subject to the buyer’s satisfaction before the buyer has any obligation to pay for value received. Payment processes should be fair, clear and transparent.
- Buck-passing: Expecting the supplier to indemnify the buyer where it cannot back that indemnity with insurance cover; and/or not including a limit on the liability of the supplier. Don’t ask a supplier to bet its business – BuildUK says no.
- Process barriers: Time bars in processes create conditions precedent and undermine the supplier’s rights and remedies.
- Unnecessary complexity: Banning verbal changes or creating such a complex change mechanism that both buyer and supplier ignore it.
- Using suppliers as credit: Paying by cheque. Really? In 21st century!
Many suppliers don’t want to work for companies that take this approach and are increasingly willing to say no to terms like these, or simply to walk away from the project. So it is even more critical that you create terms which encourage the best to work with you!
Instead of being tricksy, why not be easy to do business with? Here’s an excerpt from my keynote which explains more:
