3 Contract Templates Every Business Needs
Gemma Nugent
Plain English Contract Advice for Contractors, Engineers, Consultants and Small Businesses | Lawyer | Facilitator | Trainer | FAIM
Recently, I wrote about a client that received 4 different forms of contract from the same business, all for similar projects. We used it as a catalyst to negotiate a master services agreement, which was a win-win. Even though that situation had a good outcome, it cost both parties time and money, which could have been saved if the end client had a simple set of standard contracts with clear guidelines.
Does your business have a motley collection of Frankenstein documents?
This confusion happens more often than you might expect. Over time, commercial teams accumulate a menagerie of contracts. Some are drafted for specific projects, suppliers or products rather than general use. They might need to be updated. A few have been “inspired” by contracts from the commercial manager’s previous job. Then, the commercial manager moves on, and their successor inherits a jumble of mismatched documents. The cycle goes on, and eventually, no one knows which contract they’re supposed to use in which situation.
Or are there no standard contracts at all?
Sometimes, it’s the opposite issue. The business is a good operator and grows on the shoulders of solid relationships and handshake agreements. Suddenly, it’s a big operation with no standard contracts in its toolbox. The insurance broker nearly has a heart attack on realising that there are no written contracts for massive projects. It’s an issue for risk management, and it looks very unprofessional.
Advantages of a set of standard contracts
For many reasons, having too many or too few standard contracts can be a barrier to doing the deal. Importantly:
If you have a clear, balanced contract ready to go, you can sign up your client or supplier quickly and easily. Streamlining the formalities means no one is bogged down in convoluted negotiations, which helps get the relationship off on the right foot. It also means you can open the negotiations, which means you will set the ground rules about:
3 standard contracts every business needs
Whether you’re cleaning up the contract menagerie or you have an empty toolbox, I recommend you start with 3 simple standard contracts:
1. Standard terms of service
Unless you’re responding to a tender package that includes a contract, every proposal or quotation you send out should have your standard terms of engagement attached.
Your client will often accept them “as is” or with minor amendments. Not having terms attached to your proposals is a missed opportunity.
2. Standard purchase terms
If you’re a business, you probably buy all kinds of stuff, from the big to the s*its and bits: materials, services, PPE, toilet paper, office stationery. Often, you’ll do this by issuing a purchase order.
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There’s a strange misconception in the commercial world that a PO is not a contract. Let’s bust that myth. A PO is 100% a contract. If you issue your POs with no T&Cs, it’s still a contract – you don’t have any written terms. That’s another missed opportunity.
3. Standard subcontract
Most of my clients engage specialist subcontractors to assist with various parts of their scope. If the subcontractor doesn’t have T&Cs, you’re at sea with limited ability to challenge their performance. If they have T&Cs, they’ll be weighted in the subcontractor’s favour. Avoid both situations by having a clear, reasonable set of subcontract T&Cs. In many cases, these can be drafted to cover the typical head contracts in your industry.
How SoundLegal can help
Simplifying your contract toolbox will make your life easier, save money, and help you make more money.
We can help you make contracting easy. Book a consultation to discuss which contracts you need. Book in now, and you can start 2024 with plain English, up-to-date contract documents, ready to issue to suppliers or attach to your quotes.
About Gemma
I help construction, engineering and consulting businesses create and negotiate clear contracts so they can make more profit and achieve great project outcomes.
I founded SoundLegal to help SMEs in the engineering, construction, consulting and light industrial sectors manage their risk to support business growth, by finding practical, common sense solutions to contractual and other legal challenges.
Subscribe to the SoundLegal newsletter “No Jargon” to hear monthly business insights from me.
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