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Three Key Contracts for Retail Businesses

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Retail businesses perform a wide variety of functions. From arranging delivery of goods to arranging for the sale and purchase of goods, retail managers have a lot of responsibilities in their job. That is why retail businesses need to know the key contracts that will help protect their business. Specifically, using the right contracts will prevent potential lawsuits and keep things running smoothly on a day to day basis. This article will discuss some of the main contracts retail businesses should look to implement in the performance of their business functions. 

Retail Contracts

A retail contract outlines the terms and conditions of sale between someone looking to buy a product from your shop. Basic retail contracts can govern everything from an over-the-counter sale to the return of defective products. A retail agreement will include what is known as an ‘offer’ and ‘acceptance’, which are the two founding principles of a legally enforceable contract. 

For example, imagine that someone in a clothes shop likes a jumper and takes it to the counter with the intention of buying it. This constitutes an offer and acceptance, forming what an intention to create a legal contract. Additionally, for the contract to be enforceable, the person must pay for the goods. In legal terms, this payment is known as consideration. Therefore, your retail contract should set out the terms of how someone can pay for an item in your shop, from using credit cards to cash. 

Some shops, including mobile phone companies, also use retail installment contracts, which set out their payment terms through an installment plan. For example, over 24 months, a contract may require you to make monthly payments to a retail business for a mobile phone contract.

These contracts must state:

  • how often to make payments;
  • how much to pay in each payment interval;
  • the total sum of the contract;
  • where to make payments; and 
  • if you owe any interest on those payments. 

Retail contracts should also outline how both parties can resolve disputes relating to the agreement. Additionally, you may want to include a returns policy on that contract which should establish how long a buyer can wait before returning or exchanging goods. Moreover, you may wish to set limits on what goods they are legally allowed to exchange.

Employment Contracts 

To compete with other retail businesses, organisations working in brick and mortar shops need to have a large workforce. To acquire new workers, it is important to have well-drafted employment contracts in place that can help protect your business and respect your employees’ rights.

Poorly drafted employment contracts are one of the main causes of dispute resolutions in England and Wales. When putting together a new employment contract, there are several things you need to consider, including:

  • the term of employment; 
  • the employee’s job title and an in-depth description of their responsibilities;
  • any probationary periods they might be subject to;
  • limits on your liability as an employer;
  • confidentiality agreements;
  • notice periods for both you and the employee; and 
  • contract termination clauses detail the grounds for when you can end the contract.

The clearer you draft these clauses, the less likely disputes will arise as both parties will understand what they are signing up to. 

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Supplier Contracts

Retail stores also need to have effective supply chain contracts to continually replenish the stock in their stores. A basic supply contract will build a legal relationship between a retailer and a supplier to ensure that retailer has the stock they need on their shelves. Additionally, a well-written supply contract will also help you efficiently manage your re-stock processes without having to write new contracts with new suppliers. When writing an effective supply chain contract, you need to include: 

  • clear details on each parties’ responsibilities and a suppliers’ duties to supply and deliver fresh goods to the retailer; 
  • detailed provisions on re-orders or how often the supplier must deliver those goods; 
  • how payments are to be made and the fees to be paid to the supplier; and 
  • provisions on how either party can terminate the contract.

Key Takeaways

As disputes can arise from unclear contracts, retail businesses must set out the obligations and key terms of that contract to avoid the threat of legal action. The three most common contracts you will come across in the retail industry are:

  • retail contracts; 
  • employee contracts; and
  • supplier contracts.

Retail contracts are perhaps the most important of the three and establish the contractual agreement between a retailer and consumer. It is also advisable to get a lawyer’s advice when drafting or negotiating retail contracts. If you need assistance, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions

What is a retail contract?

A retail contract is an agreement made between a retailer and a consumer to sell and purchase a set of goods. 

What should I include in a retail employment contract? 

Retail employment contracts should include provisions that detail an employee’s duties at work, the term of their employment, how much they should be paid, and the scenarios when their contract can be terminated. 

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Edward Carruthers

Edward Carruthers

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