As a business supplying products or services, you will likely work with several different types of customers during your business journey. When entering into new commercial relationships, you will face risks during the contract lifecycle. Therefore, it is vital to take steps to manage and mitigate against such contract risks. This article will explore key steps you can take to manage contract risks when dealing with customers.<\/p>\n\n\n\n\n\n\n
When you enter into customer contracts, you expose your business to risk. If things go wrong during your commercial contracts, there could be several negative consequences. This includes:<\/p>\n\n\n\n
To avoid the above consequences, you must take active steps to set yourself up for successful commercial relationships with your customers.<\/p>\n\n\n\n
There are various steps you can take to mitigate against potential contract risks. Here are some of the critical steps you can take at different stages of your contractual journey:<\/p>\n\n\n\n
Before working with new customers, you should conduct due diligence<\/a> on them. For example, you could research them to see how long they have been established and whether they are a long-standing business. This may help you understand if the customer will be a good fit for your business. There may be certain customers you cannot deliver an excellent service to, for example, if they operate in a niche industry you are unfamiliar with.<\/p>\n\n\n\n At this pre-contract stage, you can identify potential issues with working with certain customers. If so, you can then make an informed decision about whether it is worth going into business with them.<\/p>\n<\/div>\n\n\n\n You can also carry out credit checks on potential new customers to check their creditworthiness. This could help you identify potential contract risks from the outset, such as determining whether the customer can pay your invoices.<\/p>\n\n\n\n When working with customers, you will need a robust written commercial contract to manage any potential legal risks you may face during the contract lifecycle. A written contract will give you significant legal protection and assist with risk management.<\/p>\n\n\n\n Your customer contract should include a clear \u2018Scope of Work\u2019 with precise details of the products or services you will deliver. By including details of the deliverables, there will be less risk of mismatched expectations and a customer complaining that you have failed to meet your contractual obligations.<\/p>\n\n\n\n Your commercial contract should set out the following:<\/p>\n\n\n\n In addition, you can include a thorough dispute resolution procedure clause in your contract to minimise risk further. Including this provision can be advantageous, as it will set out a procedure for the parties to follow when a problem arises. A dispute resolution clause can also steer disputes away from formal legal action and encourage the informal resolution of the dispute via negotiations. <\/p>\n\n\n\n Once you have signed your contract, you must understand it and comply with it. Failing to do so could result in you breaching your contract obligations<\/a> and potentially facing a breach of contract claim from the customer.\u00a0<\/p>\n\n\n\n There are various steps you can take to help manage contract risks after signing a contract. For example, you should:<\/p>\n\n\n\n By making sure you understand your contractual obligations, you are more likely to avoid problems and foster good working relationships. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n2. Ensure Your Contract is Robust<\/h3>\n\n\n\n
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3. Fulfill Your Contractual Obligations<\/h3>\n\n\n\n
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