The best business advice, opinion, news and expertise in Greater Manchester and further afield.

Tuesday, 28 July 2015

Member Blog: The Importance of Contracts to a Business

By Shazda Ahmed - Principal Partner at Monarch Solicitors


Contract law lies at the heart of our system of laws and serves as the foundation of our entire society. This is not an exaggeration.  It is a simple observation – one that too often goes unobserved.

Most business owners know that a contract based on just a handshake and a promise is a recipe for disaster.  Therefore, the business environment is full of agreements between businesses and individuals.

To make sure your business is protected, here are my 10 top tips you should consider when closing the deal:-

1. Never start work without a contract
You finally landed that much sought-after client and are ready to get started on the project. It's tempting to move forward on a handshake, but it's worthwhile to take the time for your client to sign a written contract.  Have your lawyer draft or review the contract to make sure it is favorable to you. If things go wrong, you need to make sure that the relationship between you and the client is set in place in a contract.

2. Think Ahead and Mitigate Risk
Contracts are a strategic tool that companies use to safeguard their resources and manage risk. In business, you don’t want to trust that you will get paid, you want to make sure you will get paid. Most people enter business relationships good intentions, but sometimes things go wrong. If a matter ends up in court, your contract can help ensure a ruling is in your favour.

3. Define the Scope of Work
You are likely to discuss a variety of projects and the client's wish list can quickly grow. When performing the job, it helps to have a clearly defined scope of work.  During the course of the relationship, should there be a misunderstanding about results, or the time in which a project was completed, you can easily refer back to the written document and quickly resolve the issue.

4. Up-sale your Services
A written contract is not only a legal document, it can also be used as a marketing tool. It provides evidence to your client that you are in control and once the scope of works has been defined in writing, it could lead the client broadening the services to be provided.

5. Take Your Time and Negotiate
Decide what points are not negotiable, but don’t budge on the important stuff such as (a) the work you do remains your work until the client pays you for it, (b) the client pays a termination fee if he terminates the project without good reason, and (c) limitation of your liability if something goes wrong with the project. The negotiating process makes it fair to both parties.

6. Include Non-Compete Clauses
Businesses often use contracts to enforce non-compete agreements, such as agency or franchise agreements. Non-compete agreements prohibit individuals or other businesses from offering goods or services in the marketplace. These contracts create strategic relationships between two companies and allow them to provide unique goods or services to consumers.

7. Ensure Scope for Variations
If your business practices change, or the project becomes totally different from how it started out, or the market changes, after signing the contract, don’t be afraid to update the contract every now and then to reflect how you actually operate or to reflect the new direction of the project. This keeps everyone on the same page, and it keeps you protected.

8. Consider New Opportunities
Another up-sale opportunity occurs upon the expiration of the contract. Prior to a project being completed, or shortly before an agreement is to end, meet with the customer. Discuss opportunities for new projects, and review the potential for extending your services for the next phase of work, now that initial results have been realised.

9. Keep it Confidential
Every business has information that considers both integral and invaluable to its success. Your agreement should contain mutual promises that each party will keep strictly confidential any business information it learns of while performing the contract.

10. Obtain Expert Insight
Legal advice should be sought before entering into any binding contract. Small businesses may be susceptible to larger businesses taking advantage of the entrepreneur’s willingness to accommodate. Contracts often include difficult legal terms and solicitors can provide clear information on the terms and advise whether a business should agree to specific contractual terms.


Shazda Ahmed is the lead solicitor of the Business Services practice in Manchester. She represents business owners in a range of practice areas, including contract drafting and disputes, landlord tenant law, real estate, new business start-ups. 

Contact the team for a FREE trial of their Legal Helpline for SMEs on 0161 464 8033 

http://www.monarchsolicitors.co.uk/

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