Contract Negotiations

July 2014

Page Director

A number of our clients have benefited recently from our help in negotiating with the following household name companies:

  • Tesco
  • Waitrose
  • Barclaycard
  • Peugeot
  • EDF
  • Wilkinsons
  • BT
  • Yodel
  • Proctor & Gamble
  • Thomson

Why negotiate?

Sometimes there’s a tendency to be grateful that you have got to the point of having a contract with a client, particularly if it is a big business with the potential for great sales.

This gratefulness can lead to a desire to be accommodating and that may lead to signing a contract without reviewing or negotiating it.

Whilst it makes basic commercial sense just to sign and get on with sales, it’s not always the best idea in the long run. Most big corporates have very onerous, very one-sided agreements that shift all risk to you as the supplier and can expose your business to significant liabilities.

That’s why it’s always a good idea to get the contract checked over to identify significant risks and negotiate some of these out/down where appropriate. Some of the classics that get missed are:

  • The term of contract being stated to be a fixed period but allowing the customer to get out early without any termination payment
  • No minimum purchase requirement – i.e. they talk about a contract being worth so many millions of pounds, but actually, there’s no commitment to purchase
  • Very onerous on-going warranty/maintenance periods
  • No limits on liability (or very high caps) that are completely out of kilter with the contract value
  • Very wide indemnities that cover everything under the sun
  • Standard clauses that are inappropriate – such as requiring IP ownership when you’re supplying software services

As well as trying to avoid some of these common pitfalls, there is also a very positive reason for getting your contracts right.

Good customer contracts become valuable assets of your business. If you are moving towards an exit or looking for investment, having good contracts in place will add value to your business. Bad ones have the opposite effect.

How do we negotiate for our clients?

These negotiations can often be hard work.

We have to push hard against intransigent legal and procurement teams to try and protect our clients’ interests, whilst using enough charm to ensure we don’t sour any of these important customer relationships.

We often have to persuade and cajole in-house lawyers to agree to mutually acceptable contract terms when the original proposal was heavily weighted in their favour (we’ve even managed this recently with a couple of supermarkets).

These issues that we have to deal with over and over again are:

  • having to ‘peg back’ unreasonable standard terms so that they match what our client will actually deliver in practice
  • dealing with procurement departments/in-house lawyers who fear straying from their precious ‘standard terms’
  • constant hand-overs between different in-house lawyers/legal secondees

With a lot of our clients we have very long term relationships and understand their businesses and risk parameters very well. This means we quite often know what they can/can’t agree to without having to take detailed instructions. The longer a relationship goes on, the better we get at negotiating contracts on our client’s behalf.

Some of our clients who require regular contract assistance use our discounted, fixed fee retainer. This helps to spread the costs and manage the legal budget better.

We really can do as little or as much as you like – we fit the service to your requirements and budget.

Do you need any help?

If you have any negotiations coming up, call Ian Grimley on 0845 241 9505 or send him an e-mail.

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