“Only Those Who Are Asleep Make No Mistakes…”
“Only those who are asleep make no mistakes”
-Ingvar Kamprad, founder of IKEA, world’s largest furniture brand
It’s only 7 words long, but what a great quote that is!
Everybody makes mistakes, especially in the business world, and as a Specialist Contractor making mistakes can be extremely costly for your business. So, it’s important to ensure that we don’t make mistakes that we could easily have avoided with a little bit of forethought.
And although what we install, and how we do it can be extremely complicated, avoiding commercial and contractual problems can be surprisingly easy with the right approach.
So, here are my 7 top tips for avoiding costly commercial and contractual mistakes.
1 Who Are You Actually Contracting With?
Even in good times Contractors will still become insolvent, and when G B Building Solutions failed earlier this year they owed over £30million their Specialist Contractors!
If the Contractor you’re working for goes bust you will get nothing!
Watch out for contracts that allow the Contractor not to pay you if the Employer becomes insolvent, because you are then taking the risk of not getting paid if they go bust.
2 Scope of the Works
It’s a chore but you should carefully check that the scope of works in the contract matches what you have priced.
At best Contractors don’t care if you get it wrong – their terms will protect them.
At worst some Contractors will deliberately manipulate the scope of works to increase their profits.
Make sure the contract period is agreed and properly documented before you start the works.
Don’t agree to work “in accordance with the Contractor’s programme” or “in accordance with his directions.”
Failing to protect your interests in respect to time can prove extremely costly!
4 Price and Discount
If you have made important qualifications in your tender make sure they are not lost when the contract is formed.
Make sure you know the fundamental basis of the contract (e.g. lump sum, re-measurable, cost plus) and therefore who is taking the risk of quantifying the scope of the works.
Don’t allow one off discounts to be applied to variations.
5 Payment Terms
Make sure the payment terms are clear and unambiguous, and that you understand how they will work in practice.
Watch out for pay when paid, or pay when certified type abuses, and make sure you know what has to be done to ensure you get paid on time.
If the payment process is linked to valuation dates make sure these are agreed and recorded and go beyond the end of the anticipated contract period.
6 Design Liability
It is very easy to acquire design liability even when you think you haven’t got any responsibility for design.
If the contract does not expressly limit your design liability to “reasonable skill and care” you will get the more onerous liability of “fitness for purpose.”
Fitness for purpose obligations will void your professional indemnity or product liability insurance cover!
7 Non Payment And Dispute Resolution!
Being able to suspend performance for non-payment is a very effective remedy.
Adjudication (used correctly) is a very effective legal solution.
Neither remedy is automatically available, and you need to ensure that these rights are not taken away by onerous drafting of the contract.
Free Advice And information
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