Renegotiating Supplier Contracts Post-Lockdown: FAQs

June 8, 2020

 

As the global business community slowly starts to emerge from lockdown, many businesses are likely to need to make significant changes to their business models to enable them to compete in a post-lockdown world.

Their relationships with customers may well have to change in order to adapt to the new economic conditions that exist after lockdown measures are eased. Not only that but customer tastes and preferences may have changed as a result of the crisis.

Some businesses could find that their pre-lockdown arrangements with their suppliers do not suit their business priorities going forward. For that reason, they may find themselves having to re-negotiate existing supplier contracts which, in some cases, may date back many years.

Here are some FAQs for successfully re-negotiating contract terms with your existing suppliers:

Am I able to re-negotiate the terms of an existing supplier contract?

Yes, provided that all parties to the contract are willing to engage in discussions. You should also check whether the contract has any formal requirements that need to be observed, for instance, changes to the contract may only be permitted if agreed in writing by a director.

How should I conduct the negotiations?

It doesn’t matter how you conduct the negotiations, whether face to face, over the phone or by email. However, it is important that you keep a record of the discussions and that any agreements reached are committed to writing. This will help avoid disputes arising in the future.

What if there are more than two parties to the contract?

Generally speaking, the fewer parties that are involved the easier the negotiations. However, provided that all parties are in agreement, it does not matter how many there are.

How long should the changes last?

You will need to decide whether the changes are permanent or temporary and, if temporary, for what period. If the changes will be long term or permanent, you should carefully consider the knock-on effect of the changes on your business more widely.

What about related contracts or third parties?

When making changes to one contract you need to consider whether there are any knock-on effects to any related contracts or third parties.

Are there any other issues to consider?

If you are making significant changes to contractual arrangements with a supplier you should consider whether those changes affect any other aspect of your business e.g. security documents with a funder, your insurance, payment cycles, contract milestones or costs budgets.

Should I consult a lawyer?

If the contract is complicated or high value then it may be worth consulting a lawyer. The changes that you are considering making may require amendments to be made elsewhere in the contract. A lawyer will be well placed to advise on these issues.

Download your free Quick Guide to Renegotiating Supplier Contracts Post-Lockdown.

 

 

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