Broken chain

So, you have an important commitment to one of your customers or another supplier. The trouble is that you’re just one link in the supply chain. How do you make sure that your supplier delivers on time so you can meet your own deadlines?

You can say in the contract that time for delivery (or even payment, in the case of your customers) is ‘of the essence’. If these words are used in a contract, then you are saying that an obligation is very important. More than that, though, if the other party does not comply with any deadline which is ‘of the essence’ in the contract then this is a ground for you being able to terminate it. This can be the case even if there is only the smallest of delays.

To make this type of clause work better you should use it only for the matters which are the most important to you. So for example, you might want to say that the time for delivery is of the essence in contracts with your suppliers and that payment is of the essence in contracts with customers. Sometimes, the Courts are willing to imply that time is of the essence, even where the parties have not said so. Rather than leave it to chance, though, it is better to use this specific wording. Otherwise you are at the mercy of the Courts who do not look at the intentions of the parties when they decide whether or not to imply certain terms.

You will need to say when the clause should be complied with, for example by giving a calendar date or time. Simply saying that something should be done ‘as soon as possible’ is not likely to be sufficient.

So, being specific about which clauses do and do not matter to you can help to manage your supply chain, and, in the case of customers, your cash flow. Be careful though if you are entering into contracts with consumers. If you are, you have to use clear wording and only give yourself the right to terminate for a breach of obligations that really are important. If you don’t then the clause could be ineffective anyway.

The key message is to think about the clauses which are important to you and make sure you give yourself the right to terminate the contract in case of breach.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.