What You Need to Know About Selling Online

Retail online is continuing to increase: with low setup costs and the potential to reach niche and mass markets worldwide it’s an attractive proposition. But if you are selling online there are some important rules you need to know about to protect your business – and your customers.

Your terms and conditions of sale must be displayed on your website where the goods are being sold and they must comply with the various regulations that apply.

The key features of the ‘Distance Selling’ regulations in the UK are:

  • you must give consumers clear information including:
    • details of the goods or services offered
    • delivery arrangements and payment
    • seller details including geographical address
    • the consumer’s cancellation right before they buy (known as prior information)
  • you must also provide this information in writing
  •  goods must be delivered within 30 days unless agreed otherwise
  • the consumer has a cooling-off period of seven working days. The cooling off period begins as soon as the order has been made. In the case of goods, it ends seven working days after the day of receipt of the goods. In the case of services, it ends seven working days after the day the order was made but if the consumer agrees to the service beginning within the seven days, the right to cancel ends when the service starts
  • where consumers notify the supplier in writing or another durable medium that they wish to cancel the contract, they must be refunded all money paid within 30 days.

So your Terms and Conditions need to cover all these points and useful clauses can also include:

  • Price – the price of goods must be shown clearly to the customer and make it clear whether VAT is included. If packing and postage is extra, this also needs to be shown.
  • Payment – it is usual to make it clear that payment must be made in full before the goods are dispatched. Sometimes a credit card transaction comes with a warning for the merchant that there is a doubt about the validity of the buyer, so you can do further checks before sending the goods if there is a potential problem
  • Force Majeure – If you are unable to deliver due to some unforeseeable event such as a fire at the warehouse or a hurricane, you can reserve the right to cancel or suspend the contract
  • Warranties – you have a legal obligation to deliver goods that meet the description on your website and are of satisfactory quality so why not say this in your T&Cs as it can give the customers some comfort.

In addition, a customer who wishes to purchase goods online, using a credit card or some other payment method, should be required to confirm that he/she has read the terms and conditions and accepted them before proceeding to the checkout. In order to have evidence that the customer is aware of the terms on which goods are sold, the usual system is to have a ‘tick box’ which must be ticked by the customer confirming that the terms and conditions have been read before the sale process can be concluded.

For more information on legislation and regulations governing the sale of goods and services and consumer protection, there are various Government and other websites that provide useful information including DirectGov – http://www.direct.gov.uk – and the Office of Fair Trading – http://www.oft.gov.uk/. There is also useful guidance in more detail at http://www.which.co.uk/consumer-rights/regulation/distance-selling-regulations/

ContractStore has created some ready-made documents for online retailers:

What Artists and Designers Need to Know About Contracts

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

Why You Need a Long Term Supply Agreement

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

What You Need To Know About Cleaning Contracts

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 Consultant Terms of Business

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:

What You Need to Know About Shareholder Agreements

If you are thinking of setting up a Company with Shareholders, be sure to have all rights and responsibilities agreed in writing.  A good contract will protect your interests and help you avoid disputes or crises.

You will need an agreement which sets out the basis on which shareholders will own, fund and manage the business and which will have a procedure for dealing with the sale of shares and for resolving differences of opinion.

Don't play Russian Roulette with your business - get everything agreed in writing

Don’t play Russian Roulette with your business – get everything agreed in writing

When a Limited Company is formed in the UK, it will usually have the model Articles of Association that are available on the Companies House website.  The Articles contain the constitution of the company – but for most people setting up a company this is not enough.

A shareholders agreement in the UK is a private contract and, unlike the Articles of Association, it is not available for anyone to access at Companies House.

Sometimes a shareholders agreement will be signed before the company is formed, but it can also come later.

Key Points to Look For in a Shareholders Agreement:

  • Parties to the Agreement

In a private company with between two and ten shareholders, it is usual for all of them to be parties to the agreement.  But this is not essential.

If, for example there are three people each with 25% of the shares and 10 other shareholders with only a small nominal shareholding, the agreement might be made between only the three main shareholders.

  •  Capital, Shares and Funding

The Agreement will normally set out the number of shares to be taken up by each shareholder, the amount payable, and whether the shares carry any special voting rights.  If shares are to be issued in return for non-cash assets – e.g. technical know-how – this will be specified.

The agreement may also stipulate that additional funding that is needed will be provided by loans from shareholders proportionate to their shareholdings; or else that the company will seek funding form an external source such as a bank.

In order to have some certainty, sometimes a business plan indicating what capital will be required, who will contribute it, and when it will be required, will be added to the shareholders’ agreement for a new company.

  • Management

Management of a company is generally undertaken through the board of directors; it is therefore important that the shareholders agree how many directors there are to be, who the first directors are, how they are to be appointed and removed and whether the holders of different classes of shares have any particular power to appoint them.

It is usual for each of the principal shareholders to have the right to appoint at least one director to the board and, where a shareholder is an individual he or she may also be a director.

Once appointed, directors may be given authority to determine how often they meet, the quorum for meetings, how their decisions are made and other matters relating to matters such as the conduct of the meetings.

Alternatively, the shareholders may wish to decide these matters themselves and set out the rules in the shareholders’ agreement.  This is especially likely to be the case when, for example, there is one major shareholder who wants to be sure that only resolutions that have his vote will be passed by the board or at a shareholders’ meeting.

Another aspect of management which the shareholders should address at the outset is the extent of the directors’ powers; the shareholders may wish to reserve certain important matters to a decision of the shareholders in general meeting of the Company.

These reserved matters may cover, for example:

  • the issue of new shares,
  • borrowing by the company above agreed limits
  • any change in the nature of the company’s business,
  • capital expenditure above an agreed amount,
  • hiring and firing of senior staff
  • joint ventures with other companies.

Specific day to day management issues may also be covered – especially if there are some special arrangements, for example where one of the shareholders provides office premises for the company.

  • Transfer of Shares

The shareholders will usually want to prevent other shareholders from disposing of their shares to third parties without having first offered them to existing shareholders.  This is normally accompanied by wording that requires the shares to be valued by an independent accountant if the sale price is not agreed.

The shareholders may also wish to provide that in certain circumstances, e.g. the death or permanent incapacity of a shareholder, that shareholder’s shares are to be offered to the other shareholders.   In the UK, it is usual for tax reasons to give shareholders the option, but not the obligation, to acquire shares of a deceased shareholder.

  • Dividend Policy

Shareholders often provide in the shareholders’ Agreement for:

  • the means of calculating net profits;
  • a percentage of the net profits that must be distributed annually;
  • any restrictions on distribution of net profits – e.g. no distribution until certain loans have been repaid.
  • Confidentiality

The agreement will usually contain a restriction on any shareholder disclosing confidential information about the company to outsiders, not only during the agreement but also after it comes to an end.

  • Default

If a shareholder become bankrupt or commits some serious breach , the agreement will usually provide for him/her to be bought out at a price fixed by the agreement.   If a shareholder who is forced out under this clause is a director of the Company, he should also be required to resign as a director.

  • Restriction on Competition

It is common practice to prevent shareholders from having an interest in a competing business and to prevent any shareholder who sells his shares to set up in competition or poach any of the company’s staff for a specified period.

  • Management Disputes

When, on issues of importance, the shareholders (either through their directors on the board or in general meeting) cannot agree, what occurs is what is known as a deadlock.  It is often agreed by the shareholders at the outset what will be done in such a situation.

A solution that is often adopted is for a shareholder to offer to sell his shares or purchase the other shareholders’ shares at a particular price.   These solutions are sometimes known as “Russian Roulette” or “Texas Shootout” provisions.

ContractStore has several useful downloads for shareholders:

Beware the Small Print on Your Website!

When Colin Cochrane showed his girlfriend’s five year old son how his online spread betting account worked, he was in for a nasty surprise.

Online Terms Can Catch You Out

Online Terms Can Catch You Out!

The child had a go on the system while he was out and he got home to find the account £50,000 in the red!

So he contacted the company, Spreadex, only to be told that as far as they were concerned, he was liable for the debt as one of the clauses in the contract said ‘you will be deemed to have authorised all trading under your account number’.

When he failed to pay, Spreadex sued Mr Cochrane. But the judge threw out their claim.

Among other things he ruled that there was no binding contract as there was no commitment on the part of Spreadex and, even if there had been a contract, it was unfair and therefore unenforceable under the Unfair Terms in Consumer Contracts Regulations.

In his judgement the judge commented on the complicated (49 page) and one sided nature of the contract.

So if you have T&Cs on your website, keep them short, fair, and easy to understand.

How to Get Paid On Time

As reported in Business Matters last week, outstanding debts to small and medium-sized business stood at a record £35.3bn at the end of last year – and large companies have been identified as the main culprits.

It is always difficult for a small firm to get money out of a larger one, especially if the supplier is dependent on the customer for ongoing business.  But the longer you leave it, the more difficult it is going to be and there is always a risk of the customer going bust before you get your money.

In this video, Giles Dixon outlines the payment terms to have in your contracts:

All businesses, however small, should take steps to protect themselves and here is a checklist of points to consider.

  • Before entering into a contract with a new customer, check their creditworthiness
  • Make sure your contract clearly specifies when each payment is due and the amount or method of calculation
  • Include in your contract terms that:
  1. Give you the right to suspend and/or terminate the contract for non-payment
  2. Entitle you to claim interest for late payment.[1]
  3. Stipulate that ownership of goods and materials supplied remains with you until you have been paid in full
  4. Issue all your invoices on time as stipulated in the contract
  • Establish internal controls to monitor payments
  • Send a reminder just before (or just after) the payment date
  • If no payment received within a week, contact the customer
  • Send a further reminder (with deadline for payment and reference to interest and possible action for recovery).

If you still do not get paid, consider exercising your contractual rights mentioned above and then moving into a more aggressive recovery process by:

  • instructing debt collectors or
  • instructing solicitors or
  • commencing action in the small claims court or using the online court service – these are especially useful when there is no good reason for non-payment and you can file the claim yourself without needing a lawyer[2] or
  • Serving a statutory demand (but take advice first, you should only use this method if there is no defence to the claim).[3]

However difficult it may be, try to maintain the relationship with the customer and do not rule out the possibility of a compromise if this is offered/can be achieved at acceptable level, especially if it includes the promise of future business.

Resources

ContractStore’s Business Terms & Conditions e-kit contains more information on this and other useful topics. Read more:  http://www.contractstore.com/LPD231-business-terms-and-conditions-ekit


[1] The Late Payment of Commercial Debts (Interest) Act allows a supplier to claim interest at 8% p.a. above Bank of England Base Rate. This can be claimed even if your contract says nothing about interest on late payment.

[2]The court website tells you what you need to know:  https://www.moneyclaim.gov.uk/web/mcol/welcome

[3] There is information on statutory demands on this Government website: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/CourtClaimsAndBankruptcy/DG_187711

Bribery Act UK: Is Your Business Prepared?

New UK legislation coming into force on July 1st 2011, requires companies to have “adequate procedures” to prevent corruption – i.e. a Code of Conduct – in order to avoid the risk of an offence under the new law.

ContractStore and GovRisk (The International Governance & Risk Institute) have teamed up to produce a template Code of Conduct to aid SMEs.

About the New Laws

On July 1st 2011, the Bribery Act comes into force in the UK. This new legislation is broad-ranging in its language and it covers corruption occurring abroad as well as at home. It is essential for companies to get a policy in place to show they are complying and avoid prosecution.

But many businesses have been slow to adopt appropriate policies and procedures, as they have yet to fully appreciate the seriousness of the Act’s implications.

New Offences

Under the Bribery Act 2011 there are four new offences:

  • Bribery of another person
  • Accepting a bribe
  • Bribing a foreign official
  • Failing to prevent bribery

Bribery Act: Key Facts

  • Companies as well as individuals can be prosecuted
  • The only defence to the new offence of failing to prevent bribery is to show you have “adequate procedures” in place to prevent such corruption
  • A company can be prosecuted for bribery in the UK and overseas, and for bribery by employees as well as third parties appointed by your organisation

Founder of ContractStore.com, Giles Dixon says:

“Every business should have a Code of Conduct in place which is compliant with the Act and the Guidance issued by the UK Government. Training of personnel is another important aspect of the compliance procedure.

“We are in the business of helping companies to keep legal costs down and we are concerned that this far-reaching legislation could expose many to prosecution. To support the UK SMEs that are our main customer base we’ve teamed up with GovRisk training providers to make available online a ready-to-use template Code of Conduct.

“Like all our documents, it’s clearly written in plain English, editable in Word and comes with explanatory notes.

“ContractStore’s model Code can be adapted to cater for particular circumstances, as the corruption risks for a company vary depending on the size and nature of the business and the areas of the world in which they operate, as well as the extent of your relationships with others – joint venture partners, agents, Government clients etc.

“We want to make it as easy as possible for UK businesses to get this issue sorted out quickly and easily.”

Prepared for ContractStore.com in conjunction with the GovRisk, this Code of Conduct is available for a limited period at a special introductory price of Ł27 (excludingVAT).

It can be downloaded online directly from www.contractstore.com. Specific guidance and tailoring services are also available.

The International Governance and Risk Institute (GovRisk) are holding an afternoon seminar and drinks reception on the “UK Bribery Act and its Impact on Your Business” on July 14th in London’s Canary Wharf from 4pm. The seminar will feature some of best experts in the field of Anti-Corruption and a drinks reception will follow. Registration is on a first come, first served basis as places are limited.

Do It Yourself: Terms & Conditions e-kit shows you how

Business Terms & Conditions e-kit

Business Terms & Conditions e-kit

ContractStore has collaborated with Lawpack to launch a new guide: the Business Terms and Conditions e-kit.

Available to download online as an e-kit, this 50 page book includes guidance on the key terms that a business should include in its Terms of Business including topics such as

  • price and payment
  • delivery
  • recourse for faulty goods
  • force majeure
  • limits of liability
  • termination.

There is also advice on debt recovery and a range of other subjects including how to get the best out of your lawyer.

The e-kit contains a number of sample documents including Terms & Conditions for supplying goods and services.

Written by three solicitors who specialize in commercial law, including ContractStore’s founder, Giles Dixon, this invaluable guide is priced at £19.99 (£17.50 plus VAT).

The Business Terms and Conditions e-kit is available online at http://www.contractstore.com/business-terms-and-conditions-ekit