COMMERCIAL PHRASES TO LOOK OUT FOR
When reviewing sections of an ITT document, there are certain phrases to look out for which can have hidden meaning. Examples of these are
shown below, along with suggested alternatives.
Typical Contract Wording
“Claims at law”
“in addition to the rights and remedies
under the contract”
“in the opinion” or “CLIENT considers to
be”
“at no additional cost to CLIENT”
“any loss it may so incur”
Problem Alternative
This wording means that the parties to the “The rights and remedies under the contract are
contract can look outwith the four corners of the exclusive and in lieu of those at law or otherwise.”
contract for alternative remedies. For example,
we may have stated an 18 month warranty period
but the implication of this wording is that the
warranty period may not be restricted to 18
months as the parties can look outwith the
contract for alternative remedies (e.g. Sale of
Goods Act).
This is a wide statement which is usually
dependant on one parties view which may not be “reasonable opinion” or “acting reasonably” or
representative of both parties position. It is “Client reasonably considers to be”
unlikely that it will be acceptable to completely
take out the concept of “opinion” but we can
soften it slightly by making it “reasonable”.
This phrase should be removed where possible. “to be charged at a rate agreed between the Parties”
Where there is a cost impact to VG, we should
always recover this in the contract (an alternative
is to build any additional costs into the rates, this
is a commercial decision depending on a number
of factors).
Where this statement refers to losses incurred by “any documented and reasonable losses properly
the Client it is recommended that this is limited to incurred as a direct additional cost”
losses which are “reasonable” or “documented”.
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“for any reason”
“immediately” …”without delay”
“fit for purpose” or “fit for its ordinary
purpose” or “fulfil its ordinary purpose”
“the lump sum shall include but not be
limited to”
“a penalty of 1% per day shall be
payable”
Withholding tax
This statement is very wide. If the context is “for the following reasons: x, y, z”
appropriate and it is in our favour to be clear, we
should include a list of “reasons”.
This statement is strict, recommend that it is “without undue delay”
softened in order that the delay is not “undue”
This wording can grant an implied warranty to the “fit for the purpose as stated in the Contract”
Buyer. The goods we are supplying should be fit
for the purpose as stated in the contract and no
other. This wording should always be amended,
This wording is an attempt by the buyer to imply “the lump sum is solely inclusive of the following
that any additional items are included in any items . . .”
quoted lump sums. VG should be specific as to
what is contained within any lump sum
quotations, anything outwith what is stated is
chargeable.
This statement is open ended. Where VG is “VG shall pay liquidated damages of [ ] per day up
accepting the liability of a penalty/liquidated to a maximum of [ ] where VG fails to [ ] and the
damages clause when we fail to meet certain customer has suffered a loss as a result, there shall
criteria we should ensure that the LD’s are be no liquidated damages for the first [ ] days.
capped, the criteria are clear and the LD’s are a These liquidated damages shall be the sole and
sole and exclusive remedy. In addition we exclusive remedy in relation to VG’s failure to [ ].”
should attempt to include a grace period before
the LD’s kick in and try to insist that the LD’s are
only payable when the customer can
demonstrate he has suffered loss.
Certain countries tax regime means that there is “If any withholding or payment is required to be
a withholding tax applied to our invoice. In this made in respect of any taxes for in relation to
instance we would expect the customer to hold products supplied and/or services performed or
us harmless from this by increasing the invoice customs duties of any nature from any payment due
value to compensate for the value of the to CONTRACTOR under this CONTRACT, COMPANY
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The company shall have the right to
audit contractor.
Goods will be delivered at contractor’s
cost to company.
Interest on late payment.
withholding tax. shall increase the relevant payment so as to ensure
the net amount received by CONTRACTOR is equal
to the amount due before such withholding or
payment.”
This is a wide statement. Audit rights can be “COMPANY may audit the CONTRACTOR at all
granted but there are some limitations which reasonable times including books, accounts,
should be included. correspondence and receipts relating to all invoiced
charges made by CONTRACTOR to COMPANY. In
this respect the COMPANY shall not be entitled to
investigate the make up of rates and lump sums
included in the contract.”
Delivery terms should always refer to the relevant “Goods shall be delivered EXW INCOTERMS 2000
INCOTERM. Preferably ex works (EXW the Contractor’s [Aberdeen] facility.”
INCOTERMS 2000). Incoterms contain all of the
details in relation to the transfer of risk and
details the responsibilities of the parties in
relation to insurance. If you are in doubt as to
which INCOTERM to use please contract your
Contracts Department or alternatively there is an
INCOTERMS website which gives an explanation
of each of the terms.
It is a statutory right under English Law that “Interest shall be payable on any late payments in
interest can be claimed on late payments accordance with the Late Payment of Commercial
whether or not it is expressly stated in the Debts (Interest) Act 1998.”
contract. The current statutory rate is 8% above
Bank of England Base Rate applied per annum.
An alternative rate can be agreed in the contract
if wished by the parties. The formula is as
follows: Debt x Interest Rate x No of Days Late /
365