Beware of legal traps!

The contract with the supplier is the cornerstone of any business relationship. Unfortunately, many people see it as a formality and don't pay enough attention to the details. This can lead to unpleasant surprises and unnecessary financial losses. In this article, I'll look at the most common legal pitfalls hidden in supplier contracts and show you how to effectively defend against them.

Author of the article: ARROWS (Mgr. Pavel Čech, office@arws.cz, +420 245 007 740)

Unclear performance specification

The basis of any contract is to clearly and understandably define exactly what the supplier will deliver. This includes in particular the specification:

• Subject matter: what exactly will be supplied (goods, services)?
• Quality: What standards must the delivery meet?
• Quantity: How many units/units will be delivered?
• Timing: When will the delivery be made?
• Place of performance: Where is the delivery to be delivered?

The unfortunate consequence of unclear or inadequate specification of the performance can then be disputes over, for example, the quality and quantity of the delivery, the delivery date or the place of performance.

How to defend yourself?

• Demand a detailed specification in the contract.
• For services, define clear deliverables and control mechanisms.
• Use contract annexes for detailed description (technical specifications, drawings).

Automatic prolongation

Many contracts contain an automatic renewal clause if the contract is not terminated in time. This can lead to unwanted continuation of cooperation on unfavourable terms.

The consequence of automatic renewal can then be unwanted lock-in to an unfavourable contract and loss of flexibility.

How to defend yourself?

• Set a calendar alert for the termination date.
• Include a flexible termination option in the contract (e.g. with a shorter notice period).
• Consider negotiating a fixed-term contract without automatic renewal.

Unbalanced contractual penalties

Some suppliers try to force penalties into contracts that are advantageous to them and disadvantageous to you. For example, high penalties for late payment but no penalties for failure to meet deadlines.

This is then associated with possible disproportionate financial losses. Do not let suppliers abuse contractual penalties.

How to defend yourself?

• Insist on mutual and reasonable contractual penalties.
• Ensure that the amount of penalties corresponds to the actual damages.
• Define clear conditions for the application of liquidated damages in the contract.

Unclear liability for defects

The contract should contain clear rules for claiming defective performance. Otherwise, the supplier may avoid liability or extend the claim period.

You certainly don't want to have the hassle of making a claim in the future, which risks wasting time and money.

How to defend yourself?

• Define clear rules for claims in the contract, including:
• The length of the warranty period
• Time limits for handling claims
• How defects will be rectified
• Consequences of failure to remedy defects

Hidden charges and unilateral changes

Some contracts allow the supplier to unilaterally change prices or introduce hidden charges. This is often done through addenda or terms and conditions.

How to defend yourself?

• The contract should contain fixed price terms.
• Any change in price should only be possible with your explicit consent.
• Read the terms and conditions and addenda to the contract carefully.

Silence is not consent

In commercial relations, the rule that silence does not mean consent applies. If you disagree with something, make it clear.

Otherwise, you may incur unwanted liabilities or lose your rights.

How to defend yourself?

• Actively communicate with the supplier.
• If you are unclear or disagree, contact a lawyer.

Choice of law and dispute resolution

The contract should include provisions about which law will govern the contract and how any disputes will be resolved.

This is the only way to eliminate uncertainty about the legal framework and to eliminate complications in resolving disputes.

How to defend yourself?

• Specify in the contract that the contract is governed by Czech law.
• Agree on the method of dispute resolution (e.g. court proceedings, arbitration).

Conclusion

Contracts with suppliers are important documents that should be taken seriously. Read each clause carefully, consult a lawyer if in doubt and insist on fair terms. By following these principles, you will minimize the risk of legal problems and ensure a safe and effective business relationship.

Not sure if your contract is well set up? Consult with ARROWS attorneys before you sign it. One meeting can save you a lot of worry, time and money.