Businesses Warned On Contracts

Retention of Title and Payment

West Midlands businessmen and women have been warned of the need to be vigilant when they buy or sell products or services.

Felix Dodd, a specialist litigation solicitor at the Solihull office of The Wilkes Partnership, has urged directors to be careful, whether they are investing in their businesses or looking to sell out.

Mr Dodd cites the recent county court case, in which he successfully represented Baron Marcus, a 76 year old Birmingham businessman who had signed up with a business sales agent called RTA to help him to sell his business on his retirement.

Mr Marcus, a small shopkeeper who owned a local hardware business called ‘So Many Things’ had been persuaded through a ‘hard sell’ by RTA to sign a document, which turned out to be a contract awarding the latter the sole agency to sell his business.

Having realised that this was not a good deal for him because of the costs involved, Mr Marcus sought to cancel within 24 hours but RTA sued him for over £6,000.00.

Though the court threw out RTA’s claim because there had been what the judge called ‘a fundamental representation’ when the firm’s service was sold to him, the case does carry a health warning for local businesses as Mr Dodd explains.

“Businesses are often prepared to agree to terms that they don’t understand. There are also many cases where businesses buy assets such as machinery, just accepting the standard ‘small print’ documents provided by those who would sell to them.

“If a business buys a major item of factory plant on the basis of statements by the company selling it, representations by the seller should be recorded clearly.

“Also documented should the nature and extent of any guarantees, warranties or technical support to ensure that the factory plant or machinery delivers on the promises made for it.

“Equally, if the installation of the plant needs supplier funded training or technical support to ensure it works efficiently, then the supplier’s commitment should be recorded too.

“Whatever else they do, business owners should understand these contracts and not rely on glib salesmen. They should also insist on written contracts to ensure clarity and the best chance of the terms being complied with or enforced”.

Apart from the example of buying such an important asset, Mr Dodd cites another illustration of the significance of contracts.

“The absence of clear and definite terms of sale by a business can lead to difficulties in collecting debts if customers invent spurious reasons to delay or withhold payments. At worst, inadequate terms can lead to expensive legal action.

“Business owners should consider the terms under which they operate to make sure that their commercial contracts work for them. Professional advice is advisable to ensure that any contracts work for you” said Mr Dodd.

For further information on any of the issues raised above please contact Felix Dodd on 0121 733 8000 or fdodd@wilkes.co.uk.