Why Self Builders Need to Put It In Writing

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It can be very rewarding to live in a home that you were involved in designing. But before you become a self-builder, it’s good to realise that construction is a complex business.

You not only have to grapple with the planning regulations and the intricacies of design, but there is a lot of work needed to co-ordinate the various suppliers and contractors if the project is not to run into difficulties.

The Self Build Dream can be wonderful but vulnerable to problems

The Self Build Dream can be wonderful – just make sure you avoid legal problems.*

And while a lot of decisions will be made on site to deal with one-off problems as they arise, it is still essential to have the basic arrangements with your architect, suppliers and builders confirmed in writing before you start.

The main reasons for this are:

  • To record the precise scope of work that you are getting for your money, not just a 200m3 building but the design and specifications as well
  • To confirm the price and the payment terms
  • To identify the time frame for the work
  • To provide a framework for dealing with issues that might arise during the life of the contract (changes, unforeseen problems etc.)

You do not need an overly complicated contract – but you do need one that is written by a professional who understands the type of issues that can occur and how they can best be dealt with.

And of all the things that you pay for to achieve your dream home a self-build contract is going to be one of the cheapest and will give you real value for money. High quality

ContractStore sells a range of contract documents for self-builders: click here to find them here.  They are much easier to complete than your new home is going to be!

Best of all, during National Selfbuild Week we are offering a 50% discount on all self-build contracts.

Developed with Self Build Zone, our contract templates are written by expert construction lawyers for the lay person to use – just download and edit in your word processor.

So there is no longer any reason to leave your project – or your finances – vulnerable to legal disputes!

*Photo of Adrian Leaman © Sarah Dixon 2011

Big Discount for Self-Build Week

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50% Off for National Self Build Week 4-12 May

ContractStore is offering a big discount on legal contract templates for self-build projects, to support National Self Build Week 2013 and the Grand Designs show 4-12 May.

All our self-build legal templates and packs are on sale at a massive 50% off during the NSB week, allowing self-builders to protect their project and reduce risks of legal disputes at an even lower cost than normal.

Giles Dixon, MD of ContractStore and construction contracts expert, said: “Building projects are complicated and it is essential to have a clear written agreement with your builder before the work starts.  Without it you are at much greater risk of cost overruns, delay and arguments over the quality of the work.”

ContractStore’s contract templates only cost a few pounds but they could save you several thousand – as well as some sleepless nights.

Organised by the National Self Build Association (NaSBA) and Grand Designs Live, the first ever National Self Build Week takes place from the 4th to the 12th May 2013, and a wide-ranging programme of events is planned to help millions of Britons turn their self build dreams into a reality.

ContractStore’s construction contracts, designed with SelfBuild Zone, allow self-builders to appoint contractors and equipment suppliers as well as professional consultants. There’s a low-cost starter pack as well.

We haven’t left out contracts for builders, tradesmen and consultants and we also sell the JCT home owner forms.

All our documents are written in plain English.

Our website also has free legal tips for self builders at www.contractstore.com/guide-self-builder

Self-Build Documents

Our Self-Builder’s Pack contains:

What Artists and Designers Need to Know About Contracts

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As an artist or designer, when commissioned to provide artwork for a client, it’s really useful – essential, some would say – to have the terms in writing.

Keep happy - protect your creations. Image from http://www.wpclipart.com

Keep happy – protect your creations. Image from www.wpclipart.com

 

While it can feel difficult for someone setting up in business to insist on the client signing a formal contract, at least be sure to confirm the main terms in writing in a letter or email.

I have come across more than one case where there is nothing in writing, and after several weeks of hard work the client is presented with the finished artwork and decides he doesn’t want to pay for it.

You have to avoid this sort of risk so here are some of the key points that any graphic designer or artist ought to identify and agree with the client.

Define the Work

It is sensible for the designer and client to have a clear understanding of the scope of work that is required. From the designer’s point of view, there will usually be a fixed fee and he doesn’t want to find that he is repeatedly being required to revise the designs to meet the client’s requirements.

Equally, the client does not know whether or not the designs will be suitable until an initial draft is produced. So, be practical and identify how many stages you will go through – e.g. initial concept, sample designs for discussion, and then the final product.

Timing

‘Time is money’ so you need to agree the timetable. Sometimes the client will have a deadline to be met. While this might put the artist under a lot of pressure, in many ways it can be better than an open-ended arrangement.

So even if there is no hurry, agree a time frame and if this gets extended by the client, reserve the right to ask for extra money. Otherwise you might find the client keeps changing his mind without expecting to have to pay for the extra work.

But unless a firm date is forced on you, use wording that makes it clear the dates are estimates and not guaranteed. This allows for some flexibility for a busy designer while avoiding the risk of the client trying to cancel because you have not delivered on time.

Fees & Payment

There will usually be a lump sum fee, but that is not always the case. Occasionally the fee will be related to the time spent on the project and sometimes there will be a mixture – e.g. a fixed amount plus £X per hour/day if more than a budgeted amount of work has to be performed.

Stage payments are always recommended and it is usual to have an advance and then maybe 2 or 3 further payments, with the final payment on delivery of the final work.

An advance of, say 30-40% means that the artist is not at risk of working for nothing, and the mere fact of the advance creates a commitment by the client, so there is less risk of him abandoning the project part way through. And in case he does, make it clear at the outset that the advance payment is not refundable.

In order to deal with extra services, you can either quote an hourly or daily rate at the beginning or else agree an extra fee at the time. Either way, be sure to cover this in writing and preferably not to start on the extra services until the fee – or your estimate – is accepted.

Cancellation

There is always the possibility of an initial design being prepared and the client then deciding not to proceed. In those circumstances, make it clear that the designer is entitled at least to retain the advance or get paid for the time spent.

Where a client does cancel, you should also make it a requirement that any designs or artwork already handed over should be returned, and that the client does not have any right to use any of the designer’s work unless the full fee is paid.

The last thing a designer wants is to find her ideas are passed on by the client to another provider for development.

Copyright

A designer will, in the absence of any agreement to the contrary, own the copyright in the artwork that she prepares.

A design may be commissioned for a business purpose – e.g. the design of a logo for a company – in which case, the client will usually want to ensure that it owns the copyright and that the designer does not have any residual rights to use those designs somewhere else.

In order to achieve this, the contract should contain a clause under which copyright and any other intellectual property rights in the design are transferred to the client. However, this should only apply once the full price has been paid. This is clearly important from the designer’s point of view.

In other cases, the agreement will say that the designer retains the copyright and, provided the client pays the full fees, he has a licence to use the designs for the purposes for which they were prepared. Other uses might justify a further payment e.g. if the client decides to sell postcards or bags using the commissioned works.

Moral Rights

Under European law relating to intellectual property, the “author” – i.e. in this case, the artist or designer – has a right to be named as the author in any document which contains that work. Sometimes these will be waived, as in the case of the company logo mentioned above.

In circumstances where the designer wishes to assert his moral rights, e.g. the designer of a book cover would usually be identified in all published copies – the contract should make it clear that the moral rights are reserved and the designer has the right to be identified as the author.

Client Obligations

It can be useful to make it clear that the client must respond promptly to any requests for approval, so as not to delay the project.

Occasionally, it can be advisable to spell out the reasons for the design and to stipulate that the work will not be used for any other purpose.

The man who designed the smiley did it for the company where he worked to cheer people up and he only discovered it was in use all over the world several years later. He never got paid anything after an initial fee of $45 for ten minutes work!

Termination

As there is no automatic right to terminate a contract, it is always advisable to include wording that allows the contract to be terminated if the client fails to pay or if either party becomes insolvent or commits a material breach of the agreement.

Useful Legal Downloads for Artists and Designers

What You Need to Know About Confidentiality Agreements

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There are many reasons why you may need a confidentiality agreement or non-disclosure agreement (NDA) and they include the following:

  • You have an idea for a new invention or a new website business and you need support from other people in developing the concept, but without the risk they will take the idea and use it themselves
  • You are taking on someone to help with your business and you want to ensure that they keep your trade secrets, customer lists etc., confidential
  • You are thinking of selling your company and you need to disclose trading details to the potential buyer before you know if he will go ahead with the purchase
  • You want to exchange information and ideas with another business with the aim of setting up a new joint venture or jointly developing a new product.
Confidentiality Agreements needn't be fierce to be effective

Confidentiality Agreements needn’t be fierce to be effective!

Because of the need to protect your ideas when embarking on a negotiation, the first agreement you will sign with your (potential) new business partner is likely to be a confidentiality agreement.

Well-established companies are used to this so, if you are an individual with a good idea but are nervous about suggesting this to a larger organisation, there is no need to be – they should understand the reasons and be willing to comply with your request.  Be wary of those who do not want to sign and simply tell you to trust them!

Although the style and content of each NDA will vary, depending on the circumstances, there are some common features in most of them.

The agreement will quite often be in the form of a letter addressed by one party to the other in which case the recipient should be asked to accept the terms set out by signing and returning a copy to the sender: only when the letter is accepted (without any open issues or qualifications) will the agreement be effective.

Alternatively the agreement may  be more formal, setting out the name and address of the parties and the terms agreed between them and signed by both parties.

The agreement will identify the information and data that is covered by the confidentiality obligations.  Quite often the wording will be generic rather than specific, and refer to the ideas, designs, know-how and products and related information that are to be disclosed by one party to the other.

There will be a time period in which the confidentiality obligations continue.  There are often two elements to this.  Firstly, the agreement will usually have a fixed period in which the parties will discuss the proposed project and, if they do not decide to go ahead after that period, the agreement will come to an end.  However, the end of the discussion period will not be the end of the confidentiality obligations and the agreement will normally provide for those obligations to continue for a specified time, say 5 years.

When the fixed period ends, the agreement should provide for all confidential information and data provided by each party to the other to be returned or destroyed.

During the agreement there may be restrictions on the use of information – e.g. that it can only be accessed by those in the recipient company who need to know about it because they are involved in the discussions.  This may be coupled with a requirement that all those individuals are themselves subject to confidentiality obligations.

The agreement will usually contain some exclusions:  information that is already publicly available or obtained by the recipient awfully from another source will not be covered by the agreement.

When the arrangements are such that one party introduces the other to third parties that might be involved in the project, it is sensible to have a clause that prohibits that other party from entering into any direct dealing with those third parties for a similar project before some time has passed after the negotiations have come to an end.

The agreement may contain a requirement that a party that breaches the agreement will indemnify the other against all loss and damage it suffers from the unauthorised disclosure. And there may be a statement that as damages may not be an adequate remedy, the innocent party will be entitled to obtain a court order prohibiting disclosure.

ContractStore has a number of relevant agreements:

  • If you run a company that is interested in developing an idea or product that someone has brought to you and that person needs to be protected by a confidentiality agreement, we have a letter form that should suffice: http://www.contractstore.com/A119-confidentiality

For the full list: http://www.contractstore.com/confidentiality-and-non-disclosure-agreements

Why You Need a Long Term Supply Agreement

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If you regularly source products from the same suppliers – or if you are a supplier with some regular customers – then it can often be of benefit for both sides, to set up a long-term agreement.

Advantages include:

  • planning ahead is easier
  • providing security of supply, for the buyer, and of orders for the supplier
  • pre-agreed pricing formula – predictable prices
  • the buyer can get a better price in return for the commitment
  • less admin – you don’t have to maintain purchase orders over and over again

This type of agreement can be useful in a wide range of businesses, from supply of raw materials in the construction industry to supply of goods to a retailer.

The milkman always delivers

Milk delivery is typically a long term supply
Image: Keystone View Co (http://hdl.loc.gov/loc.pnp/cph.3b04462) [Public domain], via Wikimedia Commons


Here are some of the basic terms you need to include in your contract.

General Scope

This establishes the basic agreement between the parties for the sale and purchase of products which will probably be defined in a Schedule.

Duration

The start date and initial period of the contract need to be specified.  This might be 12 months with the contract providing for it to be rolled over on a quarterly or longer basis until one side gives notice.  And since a long term contract involves planning ahead, each party should be required to give reasonable notice if it wants to bring the contract to an end: the buyer may need time to find another supplier and the supplier does not want to find he has committed himself to stock than he cannot readily sell elsewhere.

Quality Issues

The quality of the products is, in effect, going to be defined by reference to the specification which will be in a Schedule to the Agreement.  If the quality of any delivery does not meet the specification, the contract should make the Supplier responsible for their replacement.  In the case of some supply contracts, in particular raw materials such as coal or sand, the contract might usefully contain provision for independent testing of the material. And if the supplier is a wholesaler, the contract might require that samples are to be provided in advance if the supplier wants to source goods from a new manufacturer.

Quantities, Forecasts, Orders.

It is common to have terms that provide for the buyer to give regular forecasts of quantities, thereby enabling the supplier to be in a reasonable position to meet purchase orders.  Sometimes this involves an annual forecast which is then refined to a quarterly forecast and followed by monthly purchase orders.

Sometimes there will be agreed minimum and maximum quantities and these may be coupled with a “take or pay” provision.  In such a case, if the buyer fails to take the minimum quantity, he will pay for the shortfall.  Similarly, if the supplier fails to provide the minimum quantity, he may be penalised.

The contract will also deal with the requirements for placing an order, within minimum time periods and provision for delivery dates and a model order form can usefully be included in a schedule.

Pricing

The agreement will usually contain a schedule with details of prices but, since price adjustments in a long term contract are usually going to be necessary, there may also be a formula for price adjustments.  This could, for example, provide for a price adjustment each year by reference to the Retail Price Index published by the government in the supplier’s country.

Alternatively, prices might be adjusted by reference to the supplier’s price list or, if there is no formula, there could be a 3 month period of negotiation and if agreement cannot be reached, either party has the right to terminate the contract.  Sometimes there will be agreed discounts on list prices which may vary depending on the quantities being sold.

Payment

Generally there will either be payment on a monthly basis against invoices or, alternatively, especially in a cross-border deal, the buyer may agree to open a revolving letter of credit which will give the supplier greater security.

Payment dates and interest on late payment should also be covered.  In the UK the supplier may want to claim interest under the Late Payment of Commercial Debts (Interest) Act 1998, which allows interest to be claimed at 8% p.a. above Bank of England base rate. The supplier may also be allowed to suspend deliveries if payments are overdue for more than a specific period.

Deliveries, Risk & Ownership

The agreement will specify where deliveries are to be made and when they are to be made.  Method of transportation (and who bears the cost) can also be covered.  Both ownership and risk in product usually passes from the supplier at the delivery point.  Details of who is responsible for packaging or for the cost of storage if the buyer postpones a delivery date can also be dealt with.

Claims

Depending on the type of products and whether they are to be sold in the retail market by the buyer, there may be a clause dealing with defective product liability claims from third party customers.  In that case the contract is likely to put primary responsibility on the supplier but, if the buyer has modified any products before passing them on, the issues of liability could be complicated.

If the supply is for raw materials, a sampling and testing procedure may be appropriate, with reference to an industry expert if the buyer claims that the products are defective or sub-standard.

Termination

Be sure to include a clause that allows each party to terminate if the other commits a serious breach or becomes insolvent.

Force Majeure

In a long term contract unforeseen circumstances could disrupt the supply arrangements.  It can be useful to include a ‘force majeure’ or unforeseeable events clause so that if this occurs the party affected will not be treated as failing to perform the contract.  Examples of force majeure events can be included in the wording. As well as war and terrorism, fire and flood, there might be contract-specific items to be covered such as closure of a quarry that the supplier is relying on for his supply of rock.  If force majeure goes on for more than x months, either side can terminate the contract.

Limit of Liability

It might be sensible for the contract to limit liability for both parties – if the supplier fails to deliver an agreed quantity of material that is vital for the buyer’s business, he might agree to accept responsibility for paying the extra costs that the buyer incurs with another supplier but exclude liability for any loss of business suffered by the buyer.  Similarly, if the buyer suddenly cancels an order, he might agree to cover the supplier’s loss on that delivery if he has to sell it elsewhere at a lower price, but not pay as much as the full cost of the goods.

Disputes and Law

If a dispute occurs, it can be useful to have a three-stage process for dealing with the problem.  First, direct negotiation between senior executives, secondly, if this does not resolve the matter, the dispute can be referred to mediation.  Only after these processes can a dispute be referred to the courts or arbitration.

The form of contract is best put together with a set of terms and conditions plus a series of schedules dealing with the variable items such as details of the products, specifications, prices, minimum and maximum quantities, delivery point, price adjustment formula and a pro forma order form.

ContractStore has a long term supply contract template at: http://www.contractstore.com/A138-long-term-supply-agreement

We also have a number of contract templates for manufacturing and supply at: http://www.contractstore.com/goods-manufacture-supply

Chasing Payments? New Regs Could Help

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New regulations come into effect on 16th March 2013 concerning the interest and costs that can be claimed for late payment for supply of goods and services.

Under the existing law, a supplier to a commercial customer has the right to claim interest if he is not paid on time at the rate of 8% above Bank of England Base Rate.

Unless the parties have agreed a payment period, interest can be claimed once 30 days have elapsed after the customer receives the goods or the invoice, whichever is later.

If the contract specifies a payment date, then interest can be claimed after that period expires.

Under the new regulations, the law is tightened up a bit in favour of the supplier:

  • Where the customer is a public authority, if the contract stipulates a payment period longer than 30 days, the supplier is nonetheless entitled to claim interest once the 30 day period has expired.
  • Where the customer is a business, interest can only be claimed once the payment period in the contract has expired, but if this is more than 30 days from the invoice/delivery, the supplier may be entitled to claim interest before the period expires if he can show the period is so long as to be ‘grossly unfair’. In deciding what is grossly unfair a serious deviation from normal trade practice is one of the tests to be considered.

Where the parties have not agreed a payment period for invoices, the default position is that interest will be chargeable on payments that are overdue for longer than 30 days from the later of:

  • receipt of the supplier’s goods/services
  • receipt of the supplier’s invoice
  • verification/acceptance of the goods/services (provided the contract or any relevant statute includes a right of verification/acceptance)

The law also allows the supplier to obtain a fixed amount in respect of costs from the customer when recovering the debt. This ranges from £40 for a debt of less than £1000 to £100 for a debt of more than £10,000. The new regulations now allow the supplier to recover its ‘reasonable costs’ if these are more than the fixed sum.

Companies and public authorities that have terms of business which provide for long payment periods need to revise the terms to comply with the new regulations.

What You Need To Know About Cleaning Contracts

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Setting up a new Cleaning Services Company – or expanding your existing one?  Make sure you have some proper Terms of Business.

Make sure your cleaning contract is spotless

Make sure your cleaning contract is as professional as the work you do

 

Terms of Business do not need to be long-winded – and having them not only protects you and your business, but also helps to give your business a professional look, especially when you are bidding for work from a new client.

As well as having a document with the right terms, it is sensible to prepare the documentation in a user friendly format. My usual approach is to have the contract in three parts:

  1. Printed Terms of Business which you can show to a potential client if he asks for them;
  2. A Schedule prepared for each client that specifies the job location, services, hours, charges and other relevant information and
  3. A short one page agreement (or letter) confirming the appointment, start date etc., to be signed by you and the client – with the other two documents attached.

What terms should you include in the Terms of Business? Here are the basics:

Services 

Briefly describe the services you provide – e.g. specify the general cleaning services, with details for each client set out in the separate schedule.  It can also give comfort to a client to see that the Terms state that you take care to vet/check the competence of any new staff, that they will be required to comply with any client security procedures etc.

Duration & Notice

This will say what the minimum contract period is – maybe 6 or 12 months, whether it continues if not terminated at the end of that time and how much notice needs to be given to bring it to an end.

Charges & Payment

Either set out the agreed charges here or put them in a schedule.  In addition you should say how often invoices will be issued and the payment date – e.g. weekly with payment due 7 days from the invoice date.  It is sensible to refer to VAT and to reserve the right to increase charges on an annual basis.  You may also state that interest can be claimed on late payment (for B2B contracts the law allows you to claim 8% above Bank of England base rate).

Sometimes rates for extra services are set out in a schedule.  And remember to specify any expenses that are payable in addition to the charges.  The right to suspend services for late payment (as a softer to alternative to ending the contract) is sometimes included, usually after a 7 day notice period.

Client’s Obligations

Practical matters can usefully be covered here – e.g. the client to allow access during agreed working hours, explain all alarm and other security arrangements (and any changes), provide storage for your equipment etc.

Damage or Loss of Property

Make it clear that your liability for loss or damage to client’s property is limited to cases where you or your staff were at fault and you may want to state your liability for claims (above a certain amount) will be limited to the amount you can recover from your public liability insurers.

Client Complaints

It can be useful to insert a complaints procedure in the Terms – making it clear that complaints have to be made promptly, say within 48 hours, and that they will be properly investigated and dealt with by you.

Termination

Be sure to include a clause that allows you to terminate at any time by giving notice if the client does not pay, breaches the agreement or becomes insolvent.  Sometimes clients like to see this clause written on a mutual basis.

Force Majeure

It can be useful to include a ‘force majeure’ or unforeseeable events clause so that if this occurs you will not be treated as failing to perform the contract – although you will need to give notice and do whatever you can to overcome the problem.

No Poaching Your Staff

The risk of a client offering good cleaners a job is a real risk for cleaning companies and it is a good idea to make it clear this would be a breach of contract – both during the life of the contract and for a period after it finishes. Sometimes the Terms will require a client to pay a fee – equal to say 3 months’ salary – as damages if the obligation is broken.

Limit of Liability

It is always wise to limit liability – but be sure the limit is reasonable. Often the clause will firstly exclude liability for loss of profit and other indirect losses incurred by the client and secondly by capping the liability at a fixed amount.  Sometimes this will be related to the fees that are payable under the contract.  Since it is not permissible by law to limit liability for death or injury, this risk has to be unlimited and identifies as such.  While the contract may not require it, your firm should take out public liability insurance to protect against risks and you can then limit that liability to the amount you get form your insurers.

Disputes and Law

If a dispute occurs, it can be useful to have a three-stage process for dealing with the problem.  First, direct negotiation between senior executives, secondly, if this does not resolve the matter, the dispute can be referred to mediation.  Only after these processes can a dispute be referred to the courts.

ContractStore offers various templates that can be used for cleaning contracts, including:

 

What You Need To Know about Manufacturing Contracts

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If you have invented a product or you own the patents to a product and you are looking for a manufacturer, you will need a formal contract to protect you. But what should be in it?

Many businesses are looking overseas to China and other countries to lower their manufacturing costs and access specialist skills.

So if you are looking for a manufacturer, at home or abroad, here are some tips on what to include in your contract, often taking the form of a Licence to Manufacture. This can be more like a partnership between an inventor and manufacturer, or a simple ‘you make it, but I own it’ agreement.

Manufacturing contracts can vary quite a lot depending on the type of product, location of the factory etc., but there are a number of consideration that are common to most of these contracts.

Clearly, before you get to the stage of agreeing detailed terms, you will need to find the right company for your product and do some due diligence to satisfy yourself that the company can not only produce goods of an acceptable quality but also they can deliver the quantities you need within the right time frame.

You will also want to consider whether your manufacturer is simply going to make the goods and ship them to you, or whether he has the right to sell them as well – and if so, where?

The Licence

First of all, the main purpose of the contract will be set out. This will usually provide for the inventor or patent owner to give a licence to the manufacturer, the licensee, to manufacture the product.

The licence could be exclusive – i.e. the licensee is the only company with manufacturing rights – or non-exclusive.

Sometimes it may be exclusive but within a territory – e.g. the only factory authorised to produce the goods in China.

If your licensee wants the right to subcontract the work to others, you need to be careful, as the more the direct relationship is diluted, the more the risk of patent infringement.  However, if some part needs to be sourced from a specialist, a sublicence can make sense.  Just make sure the contract is clear that subcontracting does not relieve the licensee from his contractual obligations to you.

Duration

An arrangement such as this will generally need to be reasonably long-term, especially if there is a development phase before the product is ready for the market, as this could involve substantial time and expense on the part of the licensee.

So a term of 5 to 10 years could be appropriate, or even longer.

Development Support

Development of a new product is rarely a straightforward matter, so your input into the development is likely to be needed.  You may want a clause that limits the amount of free time that you give your licensee. Sometimes an inventor will get a consultancy fee for this work.

Pricing and Royalties

If the product has already been developed, and all you are looking for is a factory to produce the goods, then the contract can be straightforward and provide for payment against an agreed ex-works price list.

If, however, the manufacturer is going to bring your product up to an acceptable manufacturing standard at his expense and then have the right to sell the goods, you could be better off having a royalty arrangement.

This could include an up-front payment on signing the agreement, and then for the duration of the agreement, a royalty calculated as a percentage of the sales price.  This is likely to be the ex-works or wholesale price.

You might want to have the contract provide for a minimum royalty, so as to reduce the risk that the manufacturer reduces quantities in favour of some other product.

Record-Keeping and Payment

If you are buying the goods for resale, you will normally want to pay on delivery – so as to avoid the risk of paying for goods before you know they meet the specification.

If the manufacturing is overseas, the seller will want payment on shipment, so it can be useful to have your own agent in the country who can check the goods before shipment.  Insurance of goods in transit also needs to be covered, either by the supplier or the buyer.

When there are royalty payments and the manufacturer is also selling some or all of the products, it is usual to have royalties accounted for on a quarterly basis, with interest payable on late payment amounts.

And, whatever the payment terms, be sure to have a clause in the contract that gives you the right to access the Licensee’s accounts – so that you or your local agent can verify the production and sales figures – and, sometimes, the manufacturing costs as well.

Territory

In today’s global market, you need to agree in which countries the manufacturer can sell the products and whether he will have exclusive or non-exclusive access to those territories.

Intellectual Property Rights

It is essential to spell out who owns the designs and other IP rights in the product.  This will normally be the licensor, while the manufacturer as licensee has only the production rights.

As licensor you may be well advised to register your patents in the country of manufacture and anywhere else where the goods may be sold  And your licensee may be required to notify and support you if any third party is found to infringe your rights by producing or selling counterfeit goods.

Improvements

There is always a possibility that either party may want to make changes or improvements to the design and it is sensible to cover this in your contract:

1. by only allowing modifications that you have agreed to

2. by dealing with the ownership rights. A shared ownership is sometimes the right approach if your manufacturer has improved the product; this could also impact on the royalty arrangements.

Confidentiality

Clearly, this is an agreement where confidentiality is quite important and an appropriate clause should be included.

Termination

You need the right to bring the contract to an end if your licensee breaches the agreement or becomes insolvent.

You might also want to terminate if he fails to produce or sell enough products.

And the clause should set out what happens to goods that have already been manufactured when the contract comes to an end.  Do you get them or can he sell them?  A run-off period may be sensible.

Law & Disputes

If the licensor and manufacturer are in different countries, you need to get advice on how to get disputes resolved and which country’s law governs the contract.  A two or three stage dispute resolution process is often recommended– direct negotiation, then mediation (if agreed) and finally the courts or arbitration.

ContractStore has a number of contract templates for manufacturing contracts which you can find here: http://www.contractstore.com/goods-manufacture-supply

They include:

What You Need to Know About Consultant Terms of Business

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Providing services to a client? Make sure you have the deal in writing with some terms to protect you (but without annoying the client).

Use Terms of Business to protect you - without annoying the Client...

Use Terms of Business to protect you – without annoying the Client…

Whether you are providing services for a one off job or on a regular basis, it is always sensible to have the terms agreed in writing.  While the details of the service will vary depending on your trade or profession, very similar basic legal terms of business can be used by a wide range of people – from an accountant to an IT consultant, from a fitness instructor to a speech therapist.

A user-friendly way of dealing with your appointment is to confirm the key terms (start date, fees and description of services etc.) in a letter to the client and enclose some standard Terms of Business.

Here are some pointers for what to include:

Services

Depending on the type of service, you may need to set these out in detail. General wording is all very well but it can cause problems.  If, say, you offer to provide ‘accounting services’ for a client, have you agreed that this includes monthly management accounts and preparing a quarterly VAT return? Or if you are offering to design a website to meet the client’s brief, how many changes in outline design are covered by the fee?

So, ensure that the services are clearly defined.  Anything outside that scope may be an additional service that might attract an extra fee.

Timing and Duration – One Off Project, or Regular Work?

If you have a one-off project, you may want to specify a start and finish date, but it is safer to say that the final date is estimated and not guaranteed than to commit yourself to a fixed date that you might not meet.  And if you calculate your price by reference to an estimate of the time you are likely to spend, make it clear that excess time may attract an extra fee.

When you are going to provide services over a period – e.g. regular advice on a monthly basis, you may want to have a clause that commits the client to a minimum initial period, say six months, with this automatically rolling over for further periods of six months until a month’s notice is given by either party.

Fees & Expenses

You will set out the fees payable and you should also cover the payment terms – e.g. all fees to be payable within 14 days of the invoice date.  Other items to cover are out of pocket expenditure, price adjustments (in the event of changes or if you have a long term appointment) and payment of interest on overdue accounts.  Sometimes a consultant will also reserve the right to suspend services if payments are not made on time.  If you are supplying services to a business the law allows you to claim interest on late payment at 8% above Bank of England Base Rate.

Information and Approvals

It can help if the Terms make it clear that you are entitled to rely on information provided by the client and that the client has a contractual obligation to make decisions which are needed in a timely manner – all too often a client will sit on a request for approval which can cause real problems for a consultant.

Changes

Include a clause that allows you to adjust the fees and timing if the client asks for changes to the scope and if you encounter some unexpected problem.  And, especially if the client initiates a change, make it clear that the price adjustment has to be agreed in writing before the change is implemented.  It can be useful to have pre-agreed rates in the contract against which any change is calculated.

Intellectual Property

Depending on the nature of your work, you may want a clause stating that you retain copyright in the documents and designs which you prepare and the client has a licence to use them for the purposes for which they are supplied provided he pays the fees.  Sometimes the client will want to take ownership of the copyright – e.g. if you design a logo for his business.

Limiting Liability & Insurance

It is sensible to have a term that limits your liability for any claims the client might want to bring against you.  First of all it is sensible to say that liability for economic and consequential loss is excluded.  If, for example, you provide IT support, this should exclude any liability for a client’s loss of business if his system crashes due to some error on your part.  In such a case it is better to say you will fix any problems that you are responsible for at your expense, but with a reasonable overall cash limit.  Trying to exclude all liability is unlikely to be accepted and, even if it is, the client might later argue you have included an unfair term in you contract – and if a court agrees, that term would not be effective to protect you.

If you have professional indemnity insurance, include a clause that says your liability will be limited to the amount recoverable from your insurers if there is a valid negligence claim against you from the client.

Terminating the Contract

There is no automatic right for someone to terminate a contract so you should include a suitable clause.  This will usually allow either party to terminate if the other becomes insolvent or commits a breach of the contract.  On termination have clause that makes it clear you are entitled to all fees and expenses due up to termination plus reasonable costs and loss of profit if the termination is due to the client’s breach of contract.

Resolving Disputes

As court proceedings are expensive and time consuming, a clause can be included requiring any dispute to be referred to mediation before it goes to court.  Mediation is a cheaper and less adversarial way of sorting out problems. CEDR is an organisation that provides this service – www.cedr.com

ContractStore offers several templates for service providers and consultants:

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