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As a business customer, you will want to negotiate supplier contracts to protect your best interests and try to get a good deal. However, certain suppliers may refuse to negotiate your contract outright. This can be challenging for a business customer, particularly if the contract is high risk or high value. This article will explore what you can do if a supplier refuses to negotiate your business contract.
Why is Negotiation of Contract Terms Important for Business Customers?
A contract is a crucial legal agreement that outlines the terms of engagement between parties in business dealings. This document defines critical aspects of the project, such as the products or services to be provided, expected standards, pricing, and termination rights. By formalising business arrangements, potential disputes can be minimised, fostering smoother commercial relationships.
Negotiating supplier contracts is crucial for establishing beneficial partnerships. Often, suppliers present standard agreements that may not align with your business needs and could leave you with limited recourse in case of breaches. In such a case, proposing a contract tailored to your requirements or negotiating adjustments to the supplier’s agreement to protect your interests is advisable. This proactive approach can mitigate risks and enhance the overall effectiveness of supplier relationships.
For instance, negotiation may enable you to receive more favourable terms, such as a lower price, quicker delivery times, or flexible termination rights.
What Should You Do If a Supplier Refuses Negotiation?
Certain occasions may arise when a supplier refuses to negotiate with you. For example, a supplier may have standard terms and conditions for all customer projects.
The supplier may reject any amendments to those terms, stating that its contractual terms are non-negotiable and must be accepted as drafted. This can be particularly challenging for a business customer, especially where the supplier’s terms are onerous or do not reflect what you have agreed.
Let us consider some practical steps to consider if a supplier refuses negotiations below.
Consider the Risks
When faced with a supplier unwilling to negotiate, you need to assess the risks your business poses. For instance, consider if specific terms are not fit for purpose, do not reflect what you have agreed with the supplier or are too demanding.
Do the delivery dates in the supplier’s terms need to be more workable? Are there onerous cancellation rights and penalties which you cannot work with? Does the supplier have the right to charge for various additional costs you have not agreed to? Do you need meaningful remedies if the supplier breaches their obligations?
In such cases where you spot risk issues, you must carefully consider whether to proceed if such terms are not up for negotiation.
Ultimately, your business must weigh the contract risks against your risk tolerance level and make an informed decision.
Always remember that before simply signing supplier terms, it is crucial to exercise careful consideration and ensure you understand what you are signing up for.
Seek Legal Advice
Seeking the expertise of an experienced commercial lawyer can be vital when navigating negotiations with a problematic supplier.
Download this free Supplier Contracts Checklist to ensure your contracts will meet your business’ needs.
A lawyer’s review of the contract will comprehensively assess your obligations, risks and potential remedies.
A lawyer can also guide you on the best course of action and whether there is any leverage for negotiation. For instance, specific supplier terms may be unfair or unenforceable if they are outside market practice. Working with a lawyer to represent you may allow you to push for negotiations and convince the supplier to negotiate the most critical aspects of their terms. This can be particularly helpful if a particular supplier is stubborn but eventually eases on their approach once a lawyer has provided their input on key risk issues and represented your position as a customer.
Consider Alternative Suppliers
Exploring alternative suppliers may be necessary if negotiation efforts fail and the contract is too risky for you to accept.
Nevertheless, it is essential to approach each contract on a case-by-case basis and evaluate it commercially. Understand that certain very large suppliers, such as Microsoft, may be unlikely to negotiate their terms, and working with such suppliers will require a nuanced approach. For example, you may decide to sign such a third party’s terms to secure the services you need
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Key Takeaways
If a supplier refuses contract negotiation, assessing the risks to your business is vital. Assess whether the supplier’s services outweigh the risks in the contract, and if not, determine if walking away is the best course of action to get a better contractual deal. Seek legal advice to understand your rights and options, and explore alternative suppliers if negotiation efforts prove futile. By carefully weighing the risks and ensuring you fully understand non-negotiable contracts, you can protect and make informed decisions for your business.
If you need advice on a problematic supplier contract, LegalVision’s experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
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