About Clerwood Business Legal Services Edinburgh



Recent Awareness Articles

Pre Trading

Domain Names
Published on 12-Aug-12 12:45
By Gavin Tosh

Getting Business

Collaborative Tendering: the Unsolicited Proposal
Published on 30-Jul-12 12:25
By Gavin Tosh

Managing Contracts

'Clairvoyant Correspondence'
Published on 27-Aug-12 13:25
By Gavin Tosh

Growing the business

Why have a Shareholder Agreement? Part 5
Published on 11-Jun-12 13:15
By Gavin Tosh

More Awareness articles



Contact us

Name:
Email address:
Phone number:
Regarding:
Message:

 



Home » Awareness » Managing contracts » Costly disagreements: Part 2


Costly disagreements: Part 2

 Deficiencies in customer’s specification of requirements

Very often the customer will not get it right first time with their specification of requirements. Sometimes of course the nature of the requirement will dictate that a phased contract is required, with the specification for - and commitment to - each subsequent phase dependent on the results, progress and/or development of the phase before. Where a phased approach is not adopted, it is particularly important to ensure you have a initial clear and detailed written account of exactly what has been agreed is to be provided at the outset (see previous article). From such a clear baseline, it will be clear if the customer has got it wrong or missed out aspects of the product or service he was ordering. This is important from the liability aspect but it also allows any remedial or additional work which is then required to be identified clearly and costed accurately, thus offering you further protection and limiting the scope for argument.

What you are seeking to avoid is the nightmare scenario of “changing goalposts” or “specification creep” in which the customer’s demands change and expand during the course of the contract as he recognizes his initial omissions  and you cannot point to a definitive statement of the full extent of your obligations. In such a situation, you may well find yourselves in a “Catch 22″ where your choice is to render additional services without additional charge which erodes or eliminates your profitability or to hold your ground and risk being sued for breach of contract as well as not being paid.

On the other hand, it is not unknown for commercially astute (some might say nefarious) contractors to identify or calculate that a customer has got their tender specification of requirements wrong or has omitted key aspects and then submit a ‘loss leading’ bid in the expectation that profit can be made from the changes which will be needed later once the customer is fully committed.

 No changes provisions in the contract

Change happens – even if the customer has the initial specification spot-on and you have the clear written account of what is to be done. Disagreements and disputes  can develop between the parties if they have not thought out, agreed and have in writing a clear mechanism covering how the parties actually deal with such change requirements when they arise. From the supplier/contractor perspective, this should include your explicit right to charge for any additional work through changes required by the customer. It should also be explicit that the contract is to be amended in any other respects such as delivery or performance timescales.

‘Changes’ provisions in contracts vary tremendously, from a few lines in length to several pages. Generally, the larger or more complex the requirement, the more extensive the changes clause.

 

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.