Expert view: Avoiding the pitfalls of big contract wins
You may have worked for years to bring it off and nothing beats the excitement of landing a big contract. Generally, says Stephen Greenwood of Farleys Solicitors, the bigger the contract, the bigger the potential impact on your business if it goes wrong.Always remember the following:
1. If you are dealing with a bigger company you are likely to have to deal on that company’s terms. Look carefully at the small print. The company’s terms might impose lengthy periods for payment or unusual delivery terms and you may have to adjust how you work as a result.2. Are you confident that you can fulfil your obligations in the contract? The company you are dealing with might be dependent upon you meeting your obligations in order to meet theirs to a third party. If you default, the claim against you will probably include consequential losses of that company. You should look to limit your liability and insure against any risks.
3. Check whether you are required to maintain a certain level of insurance or take other steps that might affect the profitability of the contract.4. Carefully consider the solvency of the company you are dealing with. What will your exposure be if the company doesn’t pay you? When a big company becomes insolvent many smaller suppliers often follow. It is essential to insist on strong retention of title clauses and termination provisions and to look at how your company would cope with the loss of the customer.
5. If you are reliant on contracts with other parties, make sure that they are robust and consider how your big contract will be affected and what remedies you will have if your supplier defaults. 6. Ask your solicitor to review the contracts and advise you so you know exactly where you stand in all eventualities. Bringing in your solicitors will not only allow you to identify and therefore mitigate any potential risks, but will also show professionalism and commercial sense to the new client, thus setting the relationship on the right footing for what will hopefully be a long and profitable agreement for both parties.