Network contracts and agreements Ngā kirimana whatunga me ngā whakaaetanga

Here are some tips for creating an effective contract. Some apply to any contract, no matter how small or simple, and others might only be necessary for a higher-stakes contract.

• Short is good. Try a three-page limit unless your agreement is very large or complex.
• Outline what the contract is for, who it covers, and how long it lasts. Be very clear about the scope it covers and any specific exclusions.
• Keep the contract simple, avoiding jargon and abbreviations. Imagine you’re writing for someone who doesn’t know anything about your industry or business.
• Specify what is being traded, how much, and how often. Many ongoing contracts specify minimum order sizes or frequencies.
• Include any characteristics that affect value, like organic ingredients, sustainability or ethical sourcing.
• Describe any sequences of interactions between the people in the contract.
• Include payment terms such as any agreed prices and fees, how invoices will be issued and received, and how and when invoices must be paid.
• Include Service Level Agreements (SLAs) with clear metrics for the quality, availability and responsiveness of services provided. For example, the vendor will deliver 95% of orders within 3 days.
• Specify who is responsible for which tasks and what will happen if things don’t go to plan. Consider a backup clause or a ‘plan B’ in case trade doesn’t happen as expected, and describe any agreed methods for handling disputes.
• Protect your intellectual property by defining who can use it and how.
• Consider exit agreements, especially if the contract is for ongoing supply of products or services. This might be as simple as each party giving a specified notice period before leaving the contract.
• If this trade is non-standard for either party involved, highlight anything that makes it unique.

Negotiating an agreement with another business is part of establishing your relationship with them. The way you negotiate can set a good or bad precedent for the rest of your business with them.

Start by figuring out the most important things both parties want out of the agreement. Then establish what you agree on and where you might have different expectations. Suggest terms that are reasonable for both parties. Be ready to suggest and accept changes if they make sense. 

Any area of your agreement could need negotiation. Here are some areas to think about:

• Pricing and payment – Is the seller asking too much, or the buyer not offering enough? How will the pricing change over time? Will payment be before or after supply, and by how long?
• Flexibility – How easy will it be to buy or sell more or less than you have agreed? How will it affect pricing or other factors? Who pays for changes to the specification?
• Disputes and penalties – What is the appropriate penalty for breaking the contract in some way? Is the impact on the businesses involved reasonable? How will any disputes be resolved?

Some businesses, especially larger ones, have standard contracts for working together. A standard contract could be fine if you check it carefully and find it covers everything you need. Sometimes you might notice something missing, or a provision you need to change to be happy with the contract.

Don’t be afraid to ask for changes to a contract. They’re accepted more often than you might think.