Please, please, please, check it. The contract that is!
This weeks’s Wise Up Wednesday is inspired by the fact that time and time again, Specialist Contractors are getting shafted because they haven’t checked the fundamental basis on which they are starting work, or haven’t checked the contract they are being asked to enter into!
You Have No Protection
There is no legislation to protect you! You are not a consumer, you are a business, and in business to business contracts you can sign away virtually all your rights, and put your entire business at a massive commercial risk.
And guess what? Most Contractors don’t care about you, or your business or your staff, or your family.
They only care about one thing. Profit. Because profit is what they are incentivised to achieve. Not great buildings, not innovation, not inclusion, not the skills shortage, not the future of the industry. Just profit!
Please don’t misunderstand me. I like my business, and my exclusively Subcontractor Client’s businesses to make profits. But, not at the expense of others. Not by taking money wrongly from other businesses. Not by stacking the cards against those with whom they work in onerous contracts.
So Check That Contract!
Once you have signed that contract, or entered into contract by conduct, you are legally bound by its terms. So, here are 7 key things you MUST check before it’s too late!
- Who Are You Actually Contracting With?
More Contractors will become insolvent in 2018
If the Contractor you’re working for goes bust you will get nothing!
Watch out for contracts that allow the Contractor not to pay you if the Employer becomes insolvent. Do you know if the Employer is solvent?
- Scope of the Works
It’s a chore but you MUST should carefully check that the scope of works in the contract matches what you have priced.
At best Contractors don’t care if you get it wrong – their terms will protect them.
At worst some Contractors will deliberately manipulate the scope of works to increase their profits.
Make sure the contract period is agreed and properly documented before you start the works.
Don’t agree to work “in accordance with the Contractor’s programme”, or “in accordance with his directions”, or notice within 3 days being a “condition precedent to time and money”
When you are delayed, you MUST issue notices. Failing to protect your interests in respect to time will result in a massive set off!
- Price and Discount
If you have made important qualifications in your tender make sure they are not lost when the contract is formed.
Make sure you know the fundamental basis of the contract (e.g. lump sum, re-measurable, cost plus) and therefore who is taking the risk of quantifying the scope of the works.
Don’t allow one off discounts to be applied to all variations.
- Payment Terms
Make sure the payment terms are clear and unambiguous.
If the payment process is linked to valuation dates make sure these are agreed and recorded and go beyond the end of the anticipated contract period.
You MUST understand what you are agreeing to!
- Design Liability
It is very easy to acquire design liability even when you think you haven’t got any responsibility for design.
If the contract is silent on design, and does not expressly limit your liability to “reasonable skill and care” you will get the more onerous liability of “fitness for purpose.”
You MUST NOT accept “fitness for purpose” obligations. They will void your professional indemnity or product liability insurance cover!
- Dispute Resolution!
Being able to suspend performance for non payment is a very effective remedy. Don’t lose that right.
Adjudication (used correctly) is a very effective legal solution.
Neither remedy is automatically available and you MUST ensure that these rights are not taken away by onerous drafting of the contract.
WANT TO KNOW MORE?
So, there you have it. Some very real reasons why you MUST check that contract, letter of intent, or any other warranty or guarantee, or document you are agreeing to.
With the right assistance and application of the right principles at the appropriate time, you can make sure you protect your business!
I have been assisting Specialist Contractors just like you, to resolve commercial and contractual problems for the last 28 years. And, StreetwiseSubbie.com has been providing services to improve the lives of our Buddies (members) for the last 10 years.
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