LEGAL CORNER: What to ask if you are dealing with an unknown business...

Those contracts may be formed on the telephone or signified by a handshake, without being set down on paper. The parties might know each other well

Those contracts may be formed on the telephone or signified by a handshake, without being set down on paper. The parties might know each other well having dealt with each other so often that a degree of mutual trust in dealings arises.

What questions might you ask when faced with an unknown business?

n Identify the other business. Is it a sole trader, a partnership or a company? Does it have a reputation in the market place? Should you do a credit check?

If you are purchasing, who will provide the goods or services? Are you happy for that business to agree for others to provide those goods or services to you?

n Identify the subject-matter of the contract. What goods are to be purchased? What services are to be performed? If you are buying, is it important to make the other party aware of attributes which are important to you?

n Identify the price and how and when payment is to be made. Is the price fixed? If not, how is the price to be determined? Is tax (egVAT) included or excluded? Is payment to be made up-front, on delivery or by instalments? How is payment to be made?

n Identify if time of delivery or performance is critical. When is the work to be done or the goods to be supplied? Is the price linked to delivery or performance times? Have you set out a clear timetable? If times are missed, can you end or extend the contract or will you suffer or impose a penalty?

n Identify if there are circumstances when you might want the contract to come to an end. Should the contract be for a fixed period? Should the contract be brought to an end by notice to the other party? Should a fee be charged if it is brought to an end early?

n Identify the risks to you if things go wrong. Would you fail in your obligations to another business and if so would you incur financial penalties? If selling, should you try to limit your liability? If buying, should you make the other party responsible for all possible losses?

Legal advice is useful especially in the case of valuable or unusual contracts. Parties may issue standard terms and conditions suited to them. These need to be overcome. Trying to limit liability is a complex area dependent upon the particular circumstances of the deal.

Use of branding or other forms of get-up may require certain formalities to be followed so that valuable rights are not lost. Descriptions, specifications, terms of payment, notice provisions, termination provisions and default provisions need to be clearly expressed so as to minimise the risk of dispute at a later date.