“We thought the contract was pretty straightforward.”
It’s something we hear regularly from manufacturing businesses.
A contract might seem perfectly fine when everything is going smoothly. But when a supplier doesn’t deliver, a customer doesn’t pay, a project changes direction or a business relationship starts to break down, the wording of that contract can suddenly become very important.
We’ve recently been helping a number of manufacturing businesses navigate issues like these. Here’s a closer look at some of the things we’re seeing — and why it can pay to look beyond the first page of a contract.
When a straightforward contract isn’t so straightforward
For manufacturing businesses, contracts sit behind almost every part of the operation — from purchasing raw materials and engaging suppliers to selling products, outsourcing production and working with distributors and customers.
When everything goes to plan, those agreements can fade into the background. But when something changes, the contract becomes the starting point for working out what happens next.
One issue we regularly see is a gap between what the parties thought they had agreed and what the contract actually says.
Perhaps a supplier has increased its prices unexpectedly. A delivery has been delayed, leaving a manufacturer unable to meet its own commitments. A customer is refusing to pay because they say the goods weren’t what they expected. Or a business is facing a claim for losses that it believes should sit with someone else.
In these situations, the detail matters.
What does the contract actually require each party to do? Are there limits on liability? What happens if there is a delay? Can prices be changed? Who carries the risk if goods are damaged? What happens if one party wants to terminate the agreement?
These questions are much easier to deal with when the contract has been properly considered before something goes wrong.
That doesn’t mean every contract needs to be complicated or filled with pages of legal language. In fact, a good commercial contract should make the important things clear: who is responsible for what, what happens when circumstances change, and what each party can do if the other doesn’t hold up their end of the bargain.
For manufacturing businesses, where supply chains, production schedules and customer commitments are closely connected, getting those things right can be particularly important.
At Rankin Business Lawyers, we work with businesses across a range of industries, including manufacturing, helping them review, negotiate and manage the contracts that underpin their day-to-day operations.
Because sometimes the most important part of a contract is the bit you don’t think you’ll ever need.