Q: Having just recovered from getting my fingers burned by an unscrupulous customer who claimed we inflated our price for a big job without him agreeing to it, I want to know whether I can add a pricing clause into my contracts?
A: You certainly can. Furthermore, this may be the perfect time for you to get the rest of your company documentation reviewed to ensure it is all contractually, legally watertight.Unfortunately, regular reviews are something that a lot of SMEs overlook, but which are necessary to ensure compliance with current legislation and industry standards and service your company needs. To prevent legal risks and protect your business interests you should be looking at annual reviews.
Regarding a pricing clause, there are five main elements you should include: Pricing Structure, i.e. fixed fee, hourly rate, a combination? Payment terms, i.e.indicate clearly when payments are due, deposit?, interim payments?, on completion?
Incl-vat or ex-Vat? Price Adjustment, this is very important if a job is drawn out or attracts additional work, so be clear about how and when your quoted price can vary. Finally, Disputes, including a clear procedure route for resolving a pricing dispute will limit the likelihood of it escalating to litigation.
Some of those elements may also require sub-clauses to cover all eventualities and will ensure they can be tailored specifically to your business and its needs. It is also crucial that you comply with the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015, i.e. make sure they cannot be viewed as being weighted solely in your favour.
The most common failings in ‘homegrown’ pricing clauses are ambiguous wording; omissions; over complexity and not reviewing documentation regularly. As you may have already discovered, to your disadvantage, pricing clauses can be challenged in court, which can be costly both in terms of debt recovery and time lost in the business. Getting the right legal advice at the outset is well worth the cost.
This question has been answered by Richard Lloyd, Senior Partner with GHP Legal. If you would like to speak to someone about this or any other legal matter, please visit our website www.ghplegal.com and use the contact us form, or call us on: Wrexham 01978 291456, Llangollen 01978 860313, Oswestry 01691 659194
