Contract disputes and how to avoid them

Contract disputes and how to avoid them

Disputes over contracts can be expensive, stressful and time consuming – more importantly they can usually be avoided by ensuring that you have properly drawn up terms and conditions of business.

  •  Disputes over the supply of goods and services can arise over a wide range of issues, for example:
  •  Whose terms and conditions apply to a transaction in the first place – your business or theirs?
  •  Do the terms and conditions apply if delivery of goods to a customer took place before the customer signed a copy of your terms and conditions?
  •  If your consultant, agency or professional advisors fail to perform can you cancel the agreement without payment?
  •  If your supplier is late delivering goods or services, can your end customer cancel their contract with you and sue for damages?

The express terms of the contract are those that have been specifically mentioned and agreed by the parties at the time the contract was made. Implied terms are those which may be included in the contract by operation of law, even though they are not specifically stated in the contract and it is important to be aware of these.

The main implied terms are imposed by statute. The Sale of Goods Act 1979, Sale of Goods and Services Act 1982 and the Sale and Supply of Goods to Consumer Regulations 2002 imply several terms into contracts for sale. For example, that the person selling goods has the legal right to sell them, that the goods are of satisfactory quality, that goods sold by description in a catalogue or advert must correspond with that description, that the goods are fit for the purpose the customer has indicated he has for them and that goods sold by sample must match the sample quality.

The above implied terms cannot be excluded by an express term in a contract with consumers and any consumer’s statutory rights must not be breached by contractual terms. When selling to another business it may be possible to exclude implied terms expressly, but not unreasonably and you should check with us before doing so.

Examples of disputes arising from such implied terms include:

  •  when a customer returns goods on the basis that they were not suitable for the use they indicated at the time of sale, or
  •  when goods do not match the quality of a sample delivered before the sale.

Buying a standard template of terms and conditions off the internet or copying from a supplier and applying them to your business without advice can be an expensive mistake. The effects of these contract terms on your business may be quite different from what you expect and may not protect you in the event of a dispute.

It is particularly important when you procure services from organisations such as advertising agencies that that you do not inadvertently adopt their terms and conditions. These may include terms or additional costs that are onerous.

The best way to ward off potential contract disputes is to have your own contracts professionally drafted to suit your business and to take your solicitor’s advice on any contract presented to you for your approval. Your solicitor will explain the impact of both the express terms of the contract and can also tell you what implied terms may affect the contract. You may also be able to negotiate amendments to the contract that save you time and money later.

It is particularly important that only designated members of staff are authorised to accept terms and conditions. If your receptionist replies to an email accepting a quote for services or an update to an existing contractual arrangements you may find yourself bound by these new terms.

If a dispute arises over a contract with a supplier, client or business partner it is important to call us as early as you can. We offer a range of dispute resolution services and will endeavour to achieve the best possible commercial solution for your business.

If you wish to discuss your terms and conditions for both the provision and procurement of services please contact Alistair Wells or Rajan Berry.

 The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.