Relationships with your Customers & Clients - Supplier Agreements

Posted by Luke Mitchell on 25 May 2016
Relationships with your Customers & Clients - Supplier Agreements

Our last blog focused on the importance of a business knowing exactly who it is that they are contracting to provide goods and/or services to. This blog shifts the focus to the terms and conditions upon which a business acquires goods and/or services from suppliers.

Knowing exactly who it is that a business is contracting with is just as important on the supplier side as it is on the customer side. There are also additional matters that need to be considered when contracting with suppliers as when it comes to supplier agreements, the devil is often in the detail.

Key considerations for a business (and more critically business owners) when signing up to a supplier's terms and conditions include:

  • When is payment required?

  • If there a deposit payable, is it refundable if supply does not go ahead?

  • Is the price for the supply of goods and/or services subject to change? How will you be notified of any change?

  • When does risk in the goods and/or services pass from the supplier to your business?

  • Where goods are concerned, who is responsible for insuring against damage in transit?

  • When does title in the goods and/or services pass from the supplier to your business?

  • Is there a process for the repair of damaged or defective goods?

  • Are there any warranties being provided as to the quality and/or nature of the goods or services being supplied?

  • Does a default in payment terms attract interest and/or other charges?

  • Does the agreement require the provision of security?

  • Does the agreement require the provision of personal guarantees?

The last two items in the above list are the most critical for business owners. We have unfortunately seen numerous situations where a business owner has offered up their personal property (often the family home), through a guarantee or otherwise, as security under a supply agreement. The business has subsequently got itself into a position where it cannot meet its payment obligations to the supplier and the business owner becomes personally liable for a debt that they cannot pay. In some instances this has led to the loss of the family home.

It is critical that business owners read and understand the obligations that they are signing their business – and sometimes themselves – up to.  We specialise in providing clarity and confidence to business operators in their legal relationships. Prevention is the best cure so always have your proposed agreements with suppliers reviewed before you sign them.

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