Business Leaders: What contracts do you have in place and are they fit for purpose?
If you’re a business owner or leader, take a moment to do an inventory on your most important relationships (e.g., your JV partners, key suppliers, top 5 customers, your logistics providers, your key employees). Do you have a written contract governing each of these and is it fit for purpose? Particularly, is it capable of protecting you in challenging economic times?
As a further prompt, do your customer contracts deal with these 2 vital topics?
Do you have the right to terminate due to insolvency risk?
Good contracts contain clauses that allow you to terminate the agreement in certain insolvency situations – including where the other party enters liquidation, administration, bankruptcy or faces a reasonable risk of non-performance – most significantly, the risk of non-payment.
Do you have the right to register a security interest against your goods?
Depending on the nature of your business, you may need to consider the wording of your customer contracts and whether they allow you to register a security interest in respect of the goods they have purchased on credit. This is vital, and if done correctly, means you can avoid falling into the pool of unsecured creditors should it all go wrong.
Not sure where you stand?
There are many other protections that commercial contracts must address – protecting IP, warranties, limits of liability and, with foreign parties, which law should govern them.
With increasing uncertainty and more businesses swimming upstream, now is the time to review your contracts to ensure they are fit for purpose and that you understand where you sit legally. We’ve got a team of experts on hand to get you ahead of the curve. If you would like some practical advice about what your current agreement says, or what changes you could consider, please get in touch.