Who Reads the Small Print?

Every day a solicitor shudders when their client tells them “I already signed it… who reads the fine print anyway… legal mumbo jumbo” often followed by “oh dear”.  So, perhaps before we enter into a contract for goods or services we should take the time to both read and understand the small print.  This might seem like a big task but fortunately, most commercial T&Cs and contracts for the Supply of Goods and/or Services follow similar layouts addressing the key terms of any contract; simply recognising these and how to review them can save you time and money in the long term for the sake of just reading the document at the time.

1. Parties. Ensure the counterparty is the one you intended to be dealing with. Beware of subsidiaries or other group companies with similar names but which lack the substance of the main trading company. If in doubt it may be worth obtaining a guarantee from a parent company.

2. Interpretation. This section will give specific meanings to what may otherwise be generic words. Take care to read the defined terms carefully so that when a term is later used in the body of the agreement you know exactly what is or isn’t covered.

3. Goods and/or Services. This may seem simple enough but ensure this really does cover all the goods and/or services you are expecting to receive. Do not rely on what you may have discussed over the phone or by email; if it is important, then make sure it is expressly included either in the main body or as an attached document.

4. Price and Payment. Again, do not just look for the main figure. Make sure it clearly sets out what is included or excluded in the price e.g. VAT and other taxes or costs such as delivery. It must be clear when payment is due and how it should be made. For international contracts ensure currency and/or exchange rates are dealt with.

5. Delivery. Make sure you know exactly how you are receiving your goods and where you can expect physical delivery. Some contracts will use INCOTERMS to govern delivery and risk. INCOTERMS are standardised transportation and delivery terms used across industries and jurisdictions, represented by a three letter acronym. Depending on the INCOTERM used, different obligations are placed on the parties and so you must fully understand the given term e.g. there is a huge difference between EXW and DDP.

6. Quality. Statutory implied terms about the quality of goods or the standard of service will apply as a minimum, unless they have been expressly excluded (they cannot be excluded in consumer contracts), but you may also want to set certain expectations where particularly high levels of quality are required.

7. Title and Risk. Physical delivery of the goods will not necessarily mean title and risk have passed to the buyer. You can physically receive the goods yet not have legal title to them. Look out for retention of title clauses which will provide that ‘title’ or ‘ownership’ will not pass until all the goods have been paid for in full. Likewise, watch out for terms which seek to transfer risk before ownership has passed. You do not want to be responsible for paying for goods which were damaged during transit before you even take delivery. On the other hand, a seller will want risk to transfer as soon as possible after the goods have left its possession but will want to retain title for as long as possible until the goods have been paid for.

8. Termination. Whilst most contracts will end on delivery of the goods or performance of the services, consider whether you will allow for early termination by notice or immediate termination for breach of contract.

9. Limitation of Liability. The seller may try to limit (or even exclude altogether) its liability to you for any claims you may bring against it. What can be limited or excluded varies depending on whether it is a consumer or business contract, but in no cases can a party exclude its liability for fraud or death or personal injury caused by negligence.

10. Boilerplate. Don’t be tempted to ignore or overlook the boilerplate clauses (i.e. the generic clauses at the end of the agreement). These can be just as important especially when looking at the bigger picture, for example, if things go wrong and you need to take legal action. For international contracts pay particular attention to law and jurisdiction. Whilst English law and courts are preferable in most circumstances, don’t be tempted to have English jurisdiction (English law is fine) if you are dealing with an international company which has no assets in the UK. Judgement obtained from English courts may not be recognised by other jurisdictions and won’t allow you to seize assets in another country.

Undertaking a preliminary review can save a lot of trouble in the long run and should always form part of your standard due diligence process. However, for particularly complex or valuable contracts, it is always worth obtaining legal advice to ensure you are made fully aware your rights and responsibilities and that your position is properly protected.

For further information please contact Louise Hayward, Solicitor on 01256 305539 or email louise.hayward@lambbrooks.com