On one sense it doesn’t matter who is ‘right’ in this situation – the bottom line is that the supplier is not being paid. The purpose of this series of articles is to identify common causes of contractual problems and provide some tips on how to avoid them – and hopefully ensure that payment problems do not arise. The situations dealt with often end up in court but in any event can prove expensive in terms of additional costs, delays, distraction of key personnel from running the business – and then of course there is the ruining of your relationship with the customer – and especially nowadays possibly of also the ruining of your reputation in the market place.
There is a follow-up question unfortunately – ‘what do I do if despite having taken every step possible I have still not been paid?’ “Getting paid” will be the subject of future articles!
The first of the ‘costly disagreement ‘ risks is…
Different understandings of what is to be provided
This is very common. People get so excited with landing the contract and assume that the other party’s perception of the details are the same as theirs. Risk is heightened when there is a period of ‘evolving’ of the details of the contract. There may have been an initial enquiry, an indicative quotation and then a series of emails and/or telephone conversations when the details of exactly what is to be provided – when, how, for how much – are thrashed out. Too often there is no one document which captures all this ‘evolution’ and sets out clearly the final agreed version of the contract.
It is strongly advised that to avoid any later difference in perception of the details of the contract or on what terms and conditions it has been created, you should always try to have the last word, by which I mean send out an order confirmation or letter of engagement after the customer and you have agreed all the details. In this letter or email you set out the finally agreed version and you play back the whole description of what is to be done, when, for how much – indeed everything about the contract which is unique to this contract. By all means incorporate as annexures other documents which you are content be included – such as program plans, specifications etc – but enclose copes or describe them comprehensively so that there is no room for later doubt as to which documents or versions thereof apply.
If you do this:-
a) it should flush out any misunderstanding or difference in perception right at the outset of the contract, before work has started and costs incurred;
b) it provides a firm baseline against which any later agreed changes can be measured, thus protecting against the ‘moving goalposts’ scenario; and
c) should the customer still at a future time try to challenge any aspect of the agreement, you have a solid piece of evidence to place before a judge or arbitrator and which the customer will have great difficulty in successfully challenging.
Nothing in this awareness article is intended as legal advice. If you have a specific legal requirement or query you should consult a solicitor directly.