Unravelling Red Tape: Firms need to be aware of contract obligations

MANUFACTURING firms in the West Midlands rushing to finish new orders before checking on contract details or signing up to new work without the ability to complete the deal risk causing serious problems to their business, a law firm has warned.

Weightmans said many companies were distracted when they secured new work because they believed the project could catapult growth. However, the firm said that unless the full risk was understood then the results could be disastrous.

 All this week TheBusinessDesk.com, in association with Weightmans, is highlighting the regulatory burden faced by SME manufacturers and what needs to be done to improve the situation. The results are contained in our latest supplement Unravelling Red Tape, which can be downloaded here

Weightmans said firms failing to consider the full implications of what they were getting involved in also risked causing problems throughout their supply chain.

The law firm said the first thing companies had to do was to check whether they could deliver what they were being asked for. It said if volumes and timetables could not be met then trouble was likely.

It said urgency was common in the commercial world and this sometimes meant that work was started even before a contract was signed, thereby consigning the firm to all kinds of problems.

Tom Collins, associate in commercial dispute resolution for Weightmans, said failure to fulfil a deal could see the various parties falling out; a situation that could result in costly legal action.

“Whilst we would be asked to look at the position retrospectively, a manufacturer who wants to seek to mitigate or lessen the impact of a dispute ought to be clear from the outset on whose terms it is contracting and to be able to evidence those terms,” he said.

He said that businesses needed to understand the process of contract formation and in particular, ‘the battle of the forms’ – in essence, a question of who fires the last shot in contractual negotiations to ensure that their preferred terms and conditions apply, although this may not always be straightforward.