Manufacturers – Do You Have a Contract Playbook?

November 15, 2022

By Siobhan Williams

When it comes to negotiating contracts, there are a number of key legal considerations that need to be addressed. Having the right contracts in place is the key to minimising your business risk, protecting your assets and growing your business.

What is a contract playbook?

A contract “playbook” is essentially a guide which sets out a company’s default negotiating position in relation to the various provisions that appear in contracts that it is asked to sign, such as supplier and also customer contracts.

An example of the kind of issues that playbooks will cover are liability caps.

What are liability caps?

Typically, suppliers will wish to cap their liability in respect of the supply of goods and services to a customer. The level of the cap may be calculated by reference to the amount paid to them by the customer per year, or a multiple of that figure. Alternatively, a supplier may wish to cap liability by reference to the limit of its insurance cover.

The playbook will usually specify the company’s “ideal” contract position and also a fall-back negotiating position that it is prepared to go to if pushed.

Why do I need a contract playbook?

The benefit of putting together a contract play book is that it forces the company to consider its position in relation to contractual issues and risks at a time when it is not under pressure to actually sign the contract. This should hopefully mean that there will be less instances of the company agreeing to contract terms in the heat of the moment, which it later comes to regret.

A contract playbook also serves as a useful guide for employees of the company who are regularly engaged in negotiating contracts on the company’s behalf, whether on the supply or purchase side.

Having a playbook should also lower costs by reducing the amount of management time taken up with contract negotiation. It should also make the process of obtaining legal advice on a contract more streamlined and cost effective.

For more information on the options for selling your business, contact Siobhan Williams at Darwin Gray for a free initial discussion: swilliams@darwingray.com / 029 2082 9124

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