Win win – avoid the pitfalls of contract negotiation

The recent judgement in favour of BSkyB, after the company’s £700m legal battle against EDS over a failed IT system, comes as a timely reminder to companies of all sizes that, when it comes to negotiating contracts, caution and transparency must be the order of the day.
EDS’ bid team was found to have made fraudulent misrepresentations during the bid process. This case gives a clear warning that statements made about any organisation’s ability to deliver a project must have a firm basis in reality.
Another important principle when negotiating contracts is to never accept a bribe or inducement – however innocuous. The Bribery Act – originally due this April but now under review until at least May – is to include the new corporate offence of failing to prevent bribery, punishable by an unlimited fine.  
The government is attempting to allay the fears of businesses by redrafting guidance on the type of conduct that might be punishable, but until this guidance is issued later this year we do not know whether apparently harmless corporate gifts or entertaining are covered. 
Remember also that it can be illegal to share certain types of information such as personal data about customers or employees, so take legal advice before handing over any details. Granted, a confidentiality agreement could give some protection but ask yourself: does the other party really need the information you are giving, or are they just on a “fishing expedition”?
Because a contract does not need to be signed and written on paper to be binding, be careful not to “accidentally” enter into a contract on the phone or by email. Marking all correspondence “subject to contract” or “not legally binding” will clarify that you are still in negotiations.
Like most things in life, people like to do business with those they know and trust, or those that have been recommended to them. This is especially relevant to smaller companies where a simple but expensive mistake could cost the owners and staff their livelihoods.
Contracts are legally binding, so doing business only with trusted and reliable people is likely to save a lot of time, heartache and, potentially, money – advice that BSkyB and EDS might have done well to heed!
If you would like further information, you can contact me at hlw on 0114 276 5555 or via