Should I Supply Services if My Customer Hasn’t Agreed to Our Contract?

A business owner providing services must have a written contract to protect their business from risks when dealing with customers. However, a customer might not agree to your contract by refusing to sign or neglecting to acknowledge receipt and acceptance of your terms and conditions. Proceeding based on a verbal agreement might seem straightforward and the easiest way to secure the business, but it can lead to significant problems later. This article will explore the risks of supplying services without a formal contract with your customer, specifically where a customer is reluctant to agree to your terms. 

What Are the Risks of Providing Services Without a Contract?

Without an agreed written contract, the legal terms between your business and a customer will be unclear and ambiguous. You might have discussed some contract-related details, but you and your customer may not be on the same page or agree about certain aspects of the project. This ambiguity can lead to misunderstandings about the scope of work, payment schedules, deadlines, and responsibilities. When problems arise, the lack of clear, written terms makes it difficult to resolve them, increasing the likelihood of conflict and disputes. Overall, verbally agreed terms can create problems with both contractual interpretation and enforcement.

Without a legally binding contract, you also expose yourself to uncapped liability. Contracts typically include clauses that limit your liability as a supplier. Without these protections, you face greater legal risk if something goes wrong. For instance, if your service causes unforeseen losses, you could be held fully accountable without the safety of contractual limitations of liability. As such, you could end up paying your customer far more in damages than the relevant contract value. 

Additionally, being too relaxed about contractual terms may attract problematic customers, leading to frequent disputes and increasing legal and financial risks for your business. Consider the severity or trustworthiness of customers who refuse to sign a contract with you.

How Will a Contract Protect Your Business?

A written and agreed contract will clearly define the legal terms agreed upon by both parties, including the scope of services, payment schedules, deadlines, confidentiality clauses, and dispute resolution mechanisms. This clarity will help to ensure both parties understand their obligations, reducing the risk of misunderstandings and disputes.

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A contract provides a strong foundation for legal protection. In a dispute, the contract is robust evidence of what was agreed upon, making it easier to resolve conflicts and enforce your rights through legal remedies. Without a contract, proving your case and enforcing your legal rights becomes much more challenging if things go wrong.

Requiring a signed contract demonstrates professionalism and shows your customer that you take your business seriously. It sets clear expectations and builds trust, fostering a positive business relationship. Customers who see a formal, professional approach to agreements are more likely to respect your terms and comply with the agreed terms.

What are the Risks of Supplying Services Without a Contract?

You may find yourself in a position where a customer does not agree to your contract. Here are some practical risks of what could go wrong if you agree to provide services without an agreement being in place: 

You May Experience Customer Payment Problems

Without a written contract, the specifics of payment terms with your customers can become contentious. For instance, you might agree verbally on a payment schedule, but if the customer later disputes this, you will need formal contractual documentation to back up your claims. 

Imagine your business completing a large project only to have the customer argue that the final payment should be less than agreed. With written terms in an agreed contract, enforcing the original payment terms against your customer becomes easier for your business.

You May Face Problematic Customer Behaviour

Customers who refuse to sign or otherwise agree to contracts can sometimes be the ones most likely to cause problems. For example, a customer might continuously demand additional work outside the original scope, arguing that these were part of the verbal agreement. With a signed contract to specify the scope of work, you have more recourse to resist their demands without risking the business relationship.

There May Not Be a Clear Remedy for Breaches

Suppose a customer breaches the agreement by missing deadlines for providing necessary information or failing to make timely payments. In that case, the absence of a contract means enforcing rights and remedies will be more difficult for your business.

Various Customer Project Risks Could Increase

With a contract, you are exposed to far more legal risks. A contract will often contain a robust limitation of liability clause limiting the amount of damages you would be liable to pay a customer for a legal claim for breaching the contract. Without a written agreement, your business risks uncapped liability and potentially devastating costly legal claims. 

For these reasons, you should prioritise a robust, written contract with your customers before proceeding with work.

Suppose you require support with entering into contracts or face issues with a problematic customer who does not agree to your contract. In that case, you should seek guidance from a commercial lawyer on the risks your business could face and how to mitigate them. 

Key Takeaways

Starting work without a signed contract might seem convenient in the short term, but it exposes your business to significant legal risks. You should always prioritise written customer contracts to ensure your business projects run smoothly and you protect yourself from risk. If you need support convincing a customer to agree to an agreement, you should seek legal advice from a commercial solicitor to help you negotiate your contract on your behalf.

If your business needs help negotiating a contract or convincing a customer to sign your terms, 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 on 0808 196 8584 or visit our membership page.