Alternatives to contract termination
Sponsored feature | Rebecca Quinn, partner, HCR Hewitsons
Underperforming or broken contracts can have a detrimental effect on your business and your supply chain. However, in the current economic and supply market, it is essential to be innovative and resourceful in seeking ways to get contracts performing properly if you’re facing difficulties with your suppliers.
While there will be occasions in which things can’t be remedied, often compromise and conversation can lead to a successful outcome for both parties, with contracts strengthened and more productive than before.
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If you find that the level of service provided isn’t in line with what you expect from a commercial contract, or isn’t compliant with what has previously been agreed, but you don’t want to take on the risk, expense and inconvenience of finding another supplier, it is vital to diffuse the situation. This is particularly true if you have a fixed or capped contract price - I have worked with clients who have taken this approach, recognising the need for improvement. There are a number of ways to go about doing this.
Scaling back obligations for a period of time, along with offering your knowledge of the business you’re in and supporting your suppliers meet their agreements can all help to strengthen your contracts without you having to terminate and find an alternative. Although this may seem like quite an undertaking – some clients even offer their physical presence with their suppliers – the outcome is much more likely to be an improved contract rather than being left with choosing between an underperforming one or starting over from scratch.
This ‘hands-on’ approach can also lead to you and your supplier having a better understanding of how each other work, and therefore a better working relationship. A better working relationship, in turn, can lead to getting a more valuable service from your supplier – be that a personalised service, cost-effective pricing or more beneficial terms.
It is important that you comply with any contractual obligations as far as variations and notices are concerned, and you also need to be mindful not to inadvertently ‘waive’ any breaches. However, these points aside, a transparent conversation on a ‘without prejudice’ basis, should things not be able to be resolved, can end up serving the interests of both parties.
For more information, contact Rebecca Quinn, partner, commercial team, on 01223 447430, 07467 718913 or rquinn@hcrlaw.com.
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