If you are selling goods or services, two key commercial aspects of any contract are the price and payment provisions. Whilst it is rare that a supplier actually overlooks to state a price or when it expects to get paid, in a properly written contract there are provisions that are usual to support the supplier in relation to these two fundamental aspects of the commercial deal.
There is a big legal distinction between selling to consumers and selling to businesses, and this blog focuses on selling to businesses…
Silence is not usually golden
In English law contracts, it is generally much better to write in what you want because the law does not fill many gaps into the deal by default. Even if it does, you have to be sure that the default position is working for you (See Silence is golden… or is it!).
Agreements to agree are not enforceable!
The ability to increase the price in a contract must be very carefully written. A common mistake is to accept a provision which allows supplier and customer to agree a price increase in the future. This is often presented as a middle ground by the customer’s lawyers, but – it is not worth the paper it is written on. Why is this…?
This is because the customer will have to agree to the price change first. So, if the customer doesn’t agree, the supplier is stuck with the original price. The most important point is that you cannot sue a customer for not agreeing to something – although it has been possible to sue the other side for not entering into discussions in good faith (if they have contracted to enter into good faith discussions).
So, what can suppliers do in this instance?
Very simply, suppliers must have a very clear right to increase the price written into the contract, such as a clause which allows for changes to the price for factors like: inflation, raw materials, exchange rate mechanisms or other increase factors required by the supplier. (This should not be confused with change control mechanisms or other mechanisms that allow the supplier to charge if additional goods or services are requested).
For further information, contact Tracey on 01202 729444 or e-mail tracey@law-point.co.uk.
