08 September, 2010
The administration of the huge property services company Connaught which has many contracts with social housing providers raises issues that all businesses should keep in mind when negotiating contracts warns Forbes Solicitors.
Daniel Milnes, Head of Business Law at Forbes Solicitors sets out the key points which need to be considered.
- Connaught failed when some of its contracts turned out to be loss-making. The law does not allow renegotiation of a contract that turns out to be a bad deal. Do your contracts allow you to adjust prices or delivery obligations if your costs change?
- Having a supplier go into administration does not automatically allow you to terminate a contract with that supplier. You should write into your contracts the ability to end the contract if the supplier becomes insolvent.
- If a rival buys Connaught's business it might not be able to take over social housing contracts because of public procurement rules. The same rules will apply to any bodies trying urgently to hire replacement providers. Expedited procurement is possible but only if you do it properly.