We get a lot of enquiries from businesses who have signed up to a fixed term contract for goods or services but who subsequently get ‘buyer’s remorse’ and want to cancel that contract, only to find they can’t.

When a business signs a contract it becomes binding on that business.  There is no ‘cooling off’ period permitted under the law for a business-to-business contract unlike there is for consumers who get the chance to change their mind.  This means that it is very important that before signing a contract you must have made a firm decision to enter into the contract on the terms which are offered.  There is no legal right to change your mind and cancel a contract you’ve already signed when you sign it as a business.

Many of these commonplace contracts, such as for advertising, telephone contracts or business equipment hire have an initial fixed term often for 12 months or perhaps even longer.  Once the contract has been signed it becomes a binding contract.  Unless the other party agrees to release you from the contract (which in my experience never happens) you are stuck with the contract and must pay the fees due under it regardless of whether you use the goods or services supplied to you.

You should therefore be very clear in your mind that the contract is right for you and fits your business needs.  Shop around before committing to anything to make sure you’ve got the best price and terms available on the market.

Many of these contracts are formed by placing an order online.  You may not realise it but you will still be entering into a contract when you place an order online.  The contract won’t necessarily be sent to you in the post to consider at your leisure and sign and return.  You’ll be asked to tick a box confirming that you agree with the company’s terms and conditions and most people don’t click on the link to read those terms before they place their order and thereby form a contract.  Even if you haven’t read the terms and conditions but you’ve just ticked the box, you’ll be bound by the terms, whatever they may be.  Therefore always take the time to read the same print.

Some contracts are on a rolling basis so that you are tied in for an initial fixed period of say 12 months but the contract will continue for further periods of time stipulated in the contract unless you terminate it on giving the right amount of written notice before each anniversary period.  If you miss terminating the contract it will just keep continuing for another year.  This can be an expensive mistake meaning you are paying for a service you no longer need or want.

So can you ever get out of a contract?  The contract itself will say if and when you can terminate it early so check for any early termination provisions.  Otherwise, the contract will continue unless the company has breached the contract by failing to provide you with whatever goods or services you’ve signed up for.  It is not always straightforward to identify whether the supplier has terminated the contract so it is advisable to take legal advice before you terminate for breach.  If you get it wrong you will be in breach of the contract and that could end up being a costly mistake.  You might find you have to pay the supplier anyway but without receiving the goods or services you signed up for.

The important points to note therefore with contracts are:

1. Always give yourself time to consider and mull over a contract before committing yourself.  If necessary shop around.  Don’t sign anything until you’ve made a firm decision to commit to that contract.

2. Always be clear what the terms of the contract are before you sign anything.  What are you going to get from the supplier, how much will you have to pay and how often, how long will the contract last and what do you have to do to end it (will it come to an automatic end or will it automatically renew)

3. Be wary of placing an order online as this may create a contract.  Always read the terms and conditions before ticking the box when ordering anything online.  If you are unsure, contact the supplier before you place an order.

For further assistance or advice about the topics raised in this blog please contact Susan Lewis – Head of Commercial Department.

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