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How to minimise the risk of contractual disputes

  • To be able to explain what is meant by forming a contract
  • To be able to identify what a business can do pre-contract to minimise the risk of a contractual dispute
  • To be able to explain when negotiating contract terms might be difficult to do
CPD
Approx.30min

Negotiate

Leading on from the above, it is vital that parties negotiate terms that are not initially acceptable to them. 

Clear communication is key and it is always advisable to follow-up any verbal communication in writing (see mantra number one above).

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Sometimes if the parties have unequal bargaining power, negotiating contract terms might be difficult to do, but if the other party is intransigent in response to reasonable negotiation, ask yourself whether you actually want to do business with them at all.

Take advice if concerned

As they say, forewarned is forearmed, and it can prove invaluable (and a cost-saving in the long run) to take legal advice on a contract before entering into it.  

A lawyer will be able to advise you on the risks and potential consequences of particular clauses as well as to re-draft anything that is unfavourable. 

For example, a lawyer will advise you on what the difference is between 'best endeavours' and 'reasonable endeavours' and why this matters.  

Lawyer to lawyer negotiation of contract terms can also be more effective, particularly in an unequal bargaining power situation.

There is always a degree of risk when entering into a commercial contract, whether with someone new or otherwise. 

The key to minimise risk is to be aware of it from the outset and to take mitigating steps accordingly.

Jenifer Martindale is a partner at Wilsons Solicitors

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What can a business do pre-contract to minimise the risk of a contractual dispute later on (in a B2B situation)?

  2. If the transaction between the two businesses is of particularly high-value or significant, what does the author recommend?

  3. In what circumstances might negotiating contract terms be difficult to do?

  4. Those businesses who ensure their standard terms and conditions are communicated to the other party at key times can also get into contractual difficulty, if the other party is equally as diligent, true or false?

  5. What is the battle of the forms?

  6. What is meant by a contract being formed?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • To be able to explain what is meant by forming a contract
  • To be able to identify what a business can do pre-contract to minimise the risk of a contractual dispute
  • To be able to explain when negotiating contract terms might be difficult to do

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