Avoiding contractual pitfalls. In light of the fallout from the European Super League and the possible contractual implications for those teams which had signed up to the League and have since pulled out, we set out below five tips to ensure you are protected when it comes to contracting with another party.
An agreement may be required for anything from loaning money – whether commercially or to family/friends to agreeing to carry out a service in return for payment, for example, building an extension or decorating your home. Whatever the agreement, and no matter how formal or informal it may be, you should take steps to protect yourself in the event of fallout.
Verbal or Written – a contract can be formed whether verbally or in writing, however, it is always best to record the terms of the agreement in writing. This will help minimise any fallout should either party default on the agreement as you can refer to the contract terms as to how to deal with the breach. If a contract is made verbally, it will be difficult to prove what terms were agreed to then prove if that term has been breached.
Take professional advice – where possible, it is always best to take professional advice when drawing up a contract or agreement. A professional adviser can help incorporate terms into the contract to protect your position in the event a party doesn’t comply with the agreement.
Plan for the worst – whilst it can feel a bit awkward agreeing on what will happen in the event of fallout, it is easier to agree on what would happen whilst still on good terms. For example, should interest be charged on any unpaid sums?; do you have the right to withhold payment until defects are sorted?; can you terminate the contract without penalty? If these are discussed and agreed at the outset, in the event of a fall out you will be able to take speedier action to resolve the dispute.
Negotiate – a contract is normally for the benefit of all parties, whether that be paying a builder for their services to carry out work to your home, or loaning money in return for a payment in full with interest over a specified period. Having a clear agreement in which your interests are best protected on the best terms possible, means you shouldn’t shy away from negotiation. If it transpires at a later date that the agreement isn’t quite as beneficial as you thought, you are unlikely to be able to address this at a later date.
Due Diligence – we see time and time again people entering into agreements without carefully checking out the company or individual they are reaching an agreement with. Whilst it is not always easy to establish the financial position of the person you want to contract with, you should undertake as much research as possible to satisfy yourself that you are contracting with who they say they are; that they will be able to carry out the work you have paid for; or that any loaned sums can be repaid.
How we can help
We are often brought in to help clients at the point of the fallout of a contract. By taking into account the above steps, whilst we cannot guarantee you will not find yourself in the position of having to seek legal advice because a contract has been breached, it makes it easier to resolve any dispute if the above steps have been taken at the outset.
If you have any concerns over a contract or agreement you have entered into, about to enter into, or you are already at the stage where the contract has been breached and you are no longer benefitting from the contract, please get in touch on 0113 224 7808 or firstname.lastname@example.org to discuss how we can help further.
Gemma Bowkett (Associate Solicitor) 5th May 2021