SMEs, don’t ignore the clauses in your commercial contracts

Managing commercial relationships and setting rules for partners, suppliers, service providers and customers is an important step. This step is all the more important because of the current series of crises.

Whether it was the Covid crisis or the recent effects of the war in Ukraine, many companies were affected by shortages of materials, delays in shipments or rising prices (energy, fuel, etc.). These conditions would disrupt contracts negotiated on economic bases before the crisis. In fact, players are now tempted to change these contracts due to the current state of the economy.

If large companies are often armed at the legal level, VSEs / SMEs are often faced for the first time in these unique situations and discover clauses that are often overlooked when signing a contract.

Indexing clause, difficulty, force majeure …: these clauses should not be forgotten

Making a commercial contract cannot be improvised. True, there are standards in common clauses, but other more strategic things are sometimes overlooked. Problem: professionals don’t always think about integrating them into their contracts, or even, when they’re there, ignore them. However, these clauses have the power to change and completely disrupt the commercial relationship as it was originally conceived.

An indexation clause for price

Particularly topical since the rise in raw material prices, its drafting requires extra vigilance. This clause provides for the change of an element of the contract, usually the price, depending on the evolution of economic data. However, the price change should depend on an acceptable and objective index. This clause should be based on this objective index and lead to an annual increase or decrease in prices.

In the absence of such a clause or an objective index, the contract may still provide for a price change, but not under any conditions. As a reminder, a contract is a perfect price agreement. If one of the parties changes prices, the initial agreement is broken, in principle there is no longer a contract. In this sense the co-contractor who suffers this price increase should have the possibility to leave the contract within the given period.

Beware of the difficulty clause

Another risk of chaos: unpredictable. This is the case when changes in circumstances, which were not expected when the contract ended, disrupt the commercial relationship. If the contract does not specify anything or does not include it, contingency may apply. It is therefore common for one of the parties to list and provide for contract waiver cases to reject this concept. It is important to be careful about what the contract provides.

Finally, force majeure is an unpredictable, unavoidable and external event that interferes with the initial operation of the contract. Although strongly subject to judges ’interpretation, it is customary to provide as complete a list as possible of the causes of force majeure that may be involved in contract renewal: pandemic, war, attacks, riots, and so on.

Unfair terms and the significance of the contract

Another point of attention, the insertion and drafting of certain clauses that would be qualified to be abusive and considered unwritten. These prohibitive and abusive clauses have the effect of creating a significant imbalance between the parties to the contract and can be declared null and void. This is the case with a clause that compels one party to perform its obligations while the other does not perform it himself.

The contract is necessary in any commercial relationship. You don’t have to start a service without a contract. In the event of non -payment or non -compliance with the obligations of one of the parties, the contract consists of a proof and indisputable element of pressure.

This document is there to maintain a relationship and allow the parties to work peacefully, it is a guarantee of seriousness for companies. And a contract is not enough on its own, it is alive, executed in good faith and honored over time.

(Image credit: iStock)

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Philip Wagner Philippe Wagner is the co-founder of Captain Contract. A graduate of HEC, he first worked at Deutsche Bank previously as the right -hand man of Gilles Babinet, a serial entrepreneur now responsible for …
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