Get More TLC: #7: What if it goes wrong?

You can improve trust in your contracts by creating transparency and clarifying expectations as well by explaining the consequences if the project veers off track. Although I am not generally a fan of using your contracts predominantly to set out what will happen if the project goes wrong, this edition looks at adding trust byliquidating compensation.

Remedies with Added Trust

Did I ever tell you about the time I created a contract by text? It was with my 14YO, who agreed to pay me £5 if he didn’t tidy his room to my exacting standards. Admittedly, he might have assumed I would never enforce the agreement, or perhaps he’d claim lack of capacity as a minor, but it was a contract in my mind, nonetheless. 

As it says in Chapter 17 of my book on Small Works, your small works contract will create more trust and help you avoid formal disputes if it includes simple remedies when one party breaches its terms. You will be familiar with a whole host of rights and remedies which help you avoid the courts:

  • getting interest if your client pays you late (a statutory right even if your contract is silent)
  • being able to take disputes to adjudication, mediation or the courts
  • getting a supplier or contractor to repair or replace goods if they are defective – generally within a specific period after delivery or completion
  • being able to reject goods if they don’t comply with your contract or the specification… and so on.

One remedy which is often under-used is the right to claim a pre-agreed sum if your supplier breaches a specific term of the contract. It could be that they replace a key person without your permission, the products don’t work quite as intended, the goods were delivered late or without the paperwork you need, or they don’t invoice as you agreed. All these can be time-consuming to resolve but not bad enough to end the contract completely.

What you can agree is a specific (liquidated) amount of compensation for each breach. Like a fine for over-staying your parking ticket. You might have come across this if you’ve stayed in a hotel room for non-smokers – your warm welcome includes a sign saying they will charge you £250 if you smoke. That’s form of liquidated damages for your breach of the non-smoking term.