Contractual Relationships
Commercial Awareness
Commercial awareness is important in helping avoid pitfalls and also in recognising opportunities which arise in business.
Being commercially aware means “being able to appreciate the relationships, processes, risks and costs involved in commercial transactions”.
The most important of these areas is relationships as the viability of a business depends on the success of contractual relationships.
Whilst these contractual relationships ought to run profitably and safely, too often they don’t. Many problems occur due to lack of commercial awareness, which can result in recourse to the courts and expensive legal fees – or business failure.
And on the other side, recognising opportunities to secure and add value to your business is equally important but too often missed.
The Four Phases of Contractual Relationships
Commercial awareness issues arise in many situations. Let’s look at these situations in terms of four phases in the contractual relationships of a business
Pre Trading
There are so many important issues for new businesses to tackle even before they commence trading it is almost inevitable that something will be overlooked which will mean an opportunity missed or a problem stored for the future.
Being aware of issues and addressing them at the outset can enhance both the security and profitability of the business going forward.
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Getting Business
Making a sale and acquiring new business is crucial to the success. It can be challenging, costly, stressful and exciting. The opportunities seem obvious, the risks less so.
It is all too easy for business people to get carried away with the optimism, urgency and excitement; resulting in unnecessary costs, business lost – or worse – business being obtained on unclear or disadvantageous terms.
Prudence in pre-contract negotiations
In all the excitement of the chase, the friendly interchanges with the potential customer, not to mention the encouraging signs which inspire increasing confidence of a successful sale, it is easy to get carried away. Gradually as well as a lot of your time, you find...
Quotations and Tenders: Introduction
The process of establishing a contractual relationship begins with an offer being made, notwithstanding that there may have been much ‘cultivation’ of the customer and preparing of the ground beforehand. An Offer will take the form of a quotation, which could be...
Managing contracts
One should be aware constantly of the potential for problems and opportunities in the course of a contractual relationship, no matter how simple and straightforward it appeared at the outset. Having a written contract is a good start. One can of course have a verbal contract but this is asking for trouble in all but the most simple of contractual arrangements. And make sure it is in place before you start and is not an afterthought, as it may be difficult to negotiate once you have started the job.
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Growing the business
When the business has been going a while, your thoughts might turn to how to grow or develop the business by creating formal contractual relationships with others. Similarly, getting a new business off the ground can depend upon or be facilitated by such contractual relationships. These are not ‘buyer – seller’ relationships but are contractual nonetheless. Once again, pitfalls and opportunities abound.
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“The help and support I received from Gavin when setting up the West End Consortium was invaluable. He skilfully guided my business partner and I through the creation of our members agreement and Memorandum of Association, His depth and breadth of experience helped us take or business proposition through to the formulation of the West End Consortium. Post set up, Gavin has continued to be an invaluable source of ongoing advice and support. I would highly recommend Gavin to others who are thinking about setting up a new company/cooperative. “
— Catherine Thomson, Director, West End Consortium Limited
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