Its Wise Up Wednesday! “Termination for Convenience” – Court’s Decision Could Cost You Dearly!

“Termination for Convenience” – Court’s Decision Could Cost You Dearly!

This week’s “Wise Up Wednesday” is all about one of the onerous clauses that you definitely need to avoid as a Specialist Contractor, and it’s one I see a lot of in contracts that are offered to my Clients.

Before you moan and groan about “bloody contracts – I hate contracts – why can’t we just get on with the job”, or any other negative response about the chore of checking the terms of the contract, please answer this simple question;

Q – At the end of the job does the QS ever try and “negotiate” your final account down, not pay your final application properly, or come up with some “contractual” arguments as to why you are entitled to less?

Of course they do. So here’s my next question;

Q – If the contract is being used against you to knock off several £thousands, wouldn’t it have been worth spending a little more time over that contract so that at the end of the job you could keep those extra £thousands?

The return on the investment of a little time or money can be huge!

So here’s one of those onerous clauses you need to watch out for and not accept.

Termination for Convenience Clauses

A recent decision in the Commercial Court spells real danger for Specialist Contractors in respect of construction contracts containing termination for convenience clauses.

The decision means such clauses will prevent or significantly limit your claims for loss of profit even in the cases involving a repudiatory breach of contract by the Contractor!

The decision in Comau UK Limited v Lotus Lightweight Structures Limited [2014] EWHC 2122 (Comm) provides an unwelcome limitation of liability and the extent to which the clause may be relied upon to reduce damages which might otherwise be recoverable under the contract.

The decision concerned a contract for the supply of goods and services by Comau (part of the Fiat group) relating to the installation of a new production line at a factory owned by the Lotus group.

Lotus delayed in making certain payments under the contract and Comau sought to terminate under the contract and at common law for repudiatory breach. Comau brought proceedings to recover the profit it would have earned had the contract been performed by Lotus.

Here’s The Kick In The Teeth!

Lotus argued that Comau’s claim for loss of profit ought to fail due to a “termination for convenience clause” included in the contract (which provided no entitlement to recover loss of profit).

Lotus argued that it could have terminated the contract at any time and Comau therefore had no right to earn a profit for the full duration of the contract (Comau therefore had an insufficient “expectation interest” to sustain a claim for loss of profit).

What? How can that be?

But, because of the clause, the court agreed with Lotus, and applied established legal principles which require a court, when assessing damages for breach of contract, to assume that a contract-breaker will perform a contract in the least onerous way possible.

The court therefore proceeded on the assumption that Lotus would have exercised its right to terminate for convenience.

The court noted that, “any other assumption ignores the limited nature of Comau’s ‘expectation interest’ – that Comau was never entitled to profits on the whole of the goods and services to be supplied pursuant to the Agreement but was only ever entitled to such profit as it might have gained prior to any ‘termination for convenience’.”

The Scariest Aspect of the Decision

For me the scariest aspect of the court’s reasoning is the apparent absence of any need by Lotus to show that it would have exercised its right to terminate for convenience had Comau not terminated the contract.

The mere existence of the termination for convenience clause appears to have been sufficient without evidence of causation as to whether or not the clause would – as a matter of fact – have impacted upon the profits which Comau would have derived from the contract.

So Watch Out For Onerous Terms And Don’t Accept Them!

The message from this decision is clear. Don’t accept onerous clauses because one way or another they are likely to come back and bite you!

And if work is picking up, then not only should you be negotiating better prices you should be negotiating better terms too!

I hope you enjoyed my Wise Up Wednesday blog post and that it gave you some food for thought, and I sincerely hope to speak with you soon.

In the meantime if you need any help checking contracts, or with any of your business issues, please don’t hesitate to pick up the phone and give us a call.

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On Yer Bike! StreetwiseSubbie Director Completes 6-Day Cycle Ride And Raises Cash For Grandson’s Charity

StreetwiseSubbie

On the final kilometres of Alpe d’Huez

StreetwiseSubbie

On the higher reaches of the Col du Galibier

When StreetwiseSubbie director, Geoff Noake, reached his 60th birthday earlier this year, he wanted to do something special to celebrate it in the most memorable way possible. As a long-time cyclist and keen cycle racing fan, Geoff decided that a week-long cycling holiday in the Alps would be the perfect break and that he would attempt to ride up some of the most famous mountains of the Tour de France.

His 6 day ride took him from Cuneo in the Southern Alps, to the summit of Alpe d’Huez in the north and on the way he successfully cycled over 8 major alpine summits. These included the Col de I’zoard, the Col de la Bonette, which boasts the highest through road in Europe and that ‘Giant of the Alps’, the Col du Galibier. Geoff completed his ‘Tour’ with the Col de la Croix de Fer , followed by a 20 mile descent and an 8 mile ride to the summit of the most famous of them all, Alpe d’Huez.

Over the course of the week, Geoff cycled, on average, 45 miles a day – over 260 miles in total – with around 38,000 feet of climbing on roads averaging 6% and 7% gradients, but with long sections that ramped up to 9% and 10% to provide hard and sustained cycling for mile after mile. On Alpe d’Huez, the sun beat down and the road rose to 13% in places, just to add that extra bit of fun!

This was a ‘holiday’, not a charity ride, but Geoff’s youngest grandson, Max (2), has a rare skin condition called Congenital Melanocytic Naevus (CMN for short) which is basically large moles or birthmarks on the skin. These can cover up to 80% of a baby’s body, are highly volatile and often life threatening, so he opened a Just Giving page to raise what he could for “Caring Matters Now”. This is a small charity that supports children and families with CMN, so, if you think his efforts are worth a small donation, then you can find it at www.justgiving.com/Geoff-Noake. You can find out more about CMN at www.caringmattersnow.co.uk

It’s Wise Up Wednesday! 10 Ways To Make A Positive Impact On Your Specialist Contracting Business

Running any business is tough, but running a Specialist Contracting business is even tougher!

Here are 10 things you can do to make a real positive difference in your business;

  • Keep Score:It’s amazing how few Specialist Contractors have any idea of the daily, weekly, and monthly numbers. Make sure you know the financial trends in your business and keep that cash flow under control.
  • Set Goals: Like keeping score, setting goals and objectives is an essential part of business success.
  • Use High Impact Marketing: It’s easy to waste money on ineffective marketing. Learn how to use low cost marketing to improve your business.
  • Master Business Presentation Skills: Even talking one on one with a potential customer, good business presentation skills can help improve your Specialist Contracting business by leaps and bounds.
  • Monitor Trends: No business operates in a vacuum. The events and changes in the construction landscape have an effect on your business. Stay current by joining over 1,800 Specialist Contractors in this free group.
  • Sharpen Selling Skills: A high return area for business improvement is the sales function.
  • Find Best Practices: Every industry has its own best practices or ways of doing things that are tried and tested. Avoid wasting money and time reinventing the industry is generally a good approach!
  • Motivate Staff: Talented and motivated staff members can bring on big improvements in business.
  • Know Your Limits: Every successful business owner, even Bill Gates, has a clear idea of their limitations. Just accepting you can’t do it all , helps you to manage your resources andfind help when you need it.
  • Take a Break: Running a small business is hard work. Sometimes the best way to improve your business and re-ignite your passion is to take a holiday!
I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought, and I sincerely hope to speak with you soon.

In the meantime if you need any help with any of your business problems, please don’t hesitate to pick up the phone and give us a call.

It’s Wise Up Wednesday! Don’t Be A Stick In The Mud Subbie!

Don’t Be A Stick In The Mud Subbie!

Did you know that Buckminster Fuller created the “Knowledge Doubling Curve” and that he noticed that until 1900 human knowledge doubled approximately every century. By the end of World War II knowledge was doubling every 25 years.

Today on average human knowledge is doubling every 13 months.  And according to IBM the build out of  the “internet of things” will lead to the doubling of knowledge every 12 hours.

So as knowledge evolves at such a remarkable rate so must everything else, and that includes construction!

There is no way to stop change, so please don’t be a “Stick In The Mud Subbie” and think that it won’t affect you.

You will have to make changes to the way you work and adapt to forces that are outside of your control. You will need to have a long hard think about what you offer, who you offer it to, and how you can make the connection between the two better.

The main thing that is fast becoming clear is that Specialist Contractors can no longer rely upon traditional methods of estimating and bidding alone, as the ones who do will find themselves struggling up against those who have embraced the new age in which marketing, branding and relationships between company and client play a vital role alongside more traditional methods.

The construction industry has changed to adapt to client needs and expectations, and it’s the Specialist Contractors that are open to these changes and adapt accordingly that will get ahead of the game.

How Specialist Contractors Can Keep Up

Get On-line

As a Specialist Contractor you have a distinct advantage over standard businesses in that you have the ability to go out and find new clients. You don’t have to wait for the phone to ring or the new client to walk through the door and you don’t have to hope that someone will recommend you to their friends to gain new custom.

Specialist Contractors also have a unique advantage because when prospective clients want to check the available expertise, the first place they go to is on-line, meaning if you have a good on-line presence and some digital marketing you have a massive advantage in your market.

The best way to test your on-line presence is to use a search engine to search your specialist area and where you operate in the UK, e.g. “electrical contractors Derbyshire”.

What and who comes up on the first few results? You, your competitors, a larger national company?

When potential new clients search for your company on a popular review site, such as Yelp, what do they see?

Try looking at your website (if you have one) on a smartphone. Does the site appear at all and if yes, is it well converted or does it not work well on mobile?

Get Personal

Evenif you have a solid on-line presence, don’t think that is enough to get by, you are still in a service orientated “people business” where good relationships with your clients, old and new, are vital.

Being on-line is a good start and the best way to get your company name out there, but securing the client requires some time and effort put in to build the relationship and keep them satisfied and turn them into return customers.

At its core, contracting is about an agreement between two people to get something done a certain way. People. face to face, human hands shaking human hands. As convenient as email, websites, phones and faxes are, the construction industry is built on personal relationships. And in this age of digital and on-line we can often forget that.

Get out of your chair and go out and visit your clients. Show your face, shake their hand. Say hello and remind them of your connection. Call personally if you can’t go visit them. Make it a point to personally connect wherever and whenever possible.

Make personal relationship building and networking a cornerstone of your marketing process.

Make it your priority to really get to know them and their needs and focus on letting them know you understand and can give them what they want. Listen closely to what they say and how they say it.

Clients want to be heard, understood and respected. They want you to be able to make their vision come true, and they are willing to give you money to make it happen. Show them you can.

Communicate

So just take a moment to step back and really think about how you communicate with your clients.

  • Who have you not kept in touch with?
  • How do you interact with the people you are in touch with at the moment?
  • How can you improve on those areas?

Customer retention, business development, and basic relationship building are the key components to the growth of your business. Don’t just make them a priority, make them the way you do business.

For more on marketing and all sorts of other free resources take a look at our web site.

I hope you enjoyed my Wise Up Wednesday blog post and that it gave you some food for thought, and I sincerely hope to speak with you soon.

In the meantime if you need any help with any of your business problems, please don’t hesitate to pick up the phone and give us a call.