Five contract questions to test how protected you are
With IT contractors often finding the time to explore a Plan B, and even a Plan A+ - that is work in addition to their main client, it’s clearly not just straight services contracts that come under the nose of such freelance professionals.
So bearing in the mind the above, if you answer ‘no’ to ANY of the following questions, then a pair of professional eyes seems in need for your business contract(s).
• Does your company use business contract documents and procedures that were specifically drawn up for you?
• Does your business have professionally drawn up business contracts?
• Have your business contracts been reviewed recently?
• If you are planning to sell your business, or if you are looking for outside investment, are your business contracts and procedures robust enough to withstand scrutiny by a potential purchaser or investor as part of their due diligence process?
As mentioned, a negative answer to any of these questions indicates it is time that you checked out the paperwork. Your contracts are also screaming out for a review if you answer ‘yes’ to the following, fifth question:
• Have there been any significant changes in your business or its contracting procedures, or in your supplier or customer base, or in legal requirements/compliance affecting your industry or business, since your business contracts were drawn up or last reviewed?
So why bother to look at your business contracts? Well, sound business contracts and procedures are key to the success of your business.
If it’s not in the contract…
They should cover the purchase and supply of the products and services on which your business depends - such as the supply of components; services provided by other independent contractors or recruitment agents, the way your business supplies its customer(s) and the way such clients deal with your business.
Your business contracts also play an important role in the operation of your business. The sales and purchase documents and procedures need to be integrated, so that they operate smoothly across the business.
Says here I can’t be blamed
Your business contracts should also form part of your risk management strategy. They should set out what happens if something goes wrong on either side for whatever reason – whether accidental, deliberate, caused by something outside your control and so on and the consequences in each case. Warranties or limitation of liability should be addressed in an appropriate way. By ensuring that your business contracts and procedures for purchases and sales are harmonised you can minimise the impact so far as possible if you experience problems – for example with the supply of a component, or if you have difficulties with the performance of a customer which impacts on the ability of your business to meet its obligations under its supply commitments.
Contractors who take on contractors
If your business uses contractors as part of its delivery, the factors relevant to the role of those contractors in your business should be addressed in appropriate business contracts. The issues will vary enormously but will include matters such as the services they are to perform, protection of your – and, where applicable, your clients’ - confidential information; ownership of output including intellectual property, what and when they will be paid, any qualifications and insurance they must hold, warranty and limitation of liability issues and so on.
How well are you protected?
We don’t want to induce sleepless nights (!), but try to consider whether your business is as well protected as it might be - how do you fare against the above pointers? These should give you an indication as to the level of protection you currently have.
The optimum position is that the business contracts and procedures across all parts of your business should be up-to-date and form part of an integrated system corresponding to the way your business operates. As we’ve said before, don’t wait for others to find fault with your commercial paperwork. The onus is on Plan B contractors, their A+ counterparts and even those firmly fixed on Plan A to achieve the optimum position but, remember, professional help is at hand so you are by no means alone.
As told to ContractorUK by Sue Mann, a commercial solicitor at legal advisory Cousins Business Law.