Watford Solicitors

SMALL BUSINESS TIPS AND ANSWERS TO FREQUENTLY ASKED QUESTIONS – WATFORD SOLICITORS

Sale of Goods and Risk

Once a contract has been created for the sale of goods an issue which is always relevant is who bears the risk of those goods being damaged or stolen before they are handed over to the end customer.

When transporting goods to be delivered from one party to another there is always a risk of damage. When agreeing terms you must consider at which stage each party carries the burden of risk. If using a third party carrier this is especially important.

Transportation Risks

The change of hands when transporting goods can be numerous and increase the risk of damage, loss or theft. The necessity of using 3rd party carriers means more risk of damage because of increased risk of damage by varying environmental conditions or during exchange between carriers. A further problem is that the exact place where damage has taken place is not easily identifiable. For example, if goods have been manufactured or supplied by one country, such as Thailand they will then have to be transported, using a third party shipping company to the United Kingdom. When reaching the UK they must then be transported throughout the UK using lorries.

If there is any element of transport between buyer and seller it is wise to have terms in writing before the terms of agreement are carried out. If the goods are manufactured in the same country as their final destination then deciding which party carries the burden of risk at each stage is relatively simple.

Your contract should specify who is responsible for the welfare of the goods in the event that they are damaged, stolen or lost.

As a basic structure it is advisable to agree to the following terms:

·         If the goods are individually identifiable or whether you are buying as a bulk.

·         The dates the goods will be dispatched and received.

·         Will there be any warranties to accompany the agreement.

·         The possibility of arbitration

·         What factors trigger termination

Sale of Goods

In the absence of a carefully constructed contract the Sale of Goods Act 1979 governs the distinction between who owns the goods and who will be considered liable if something happens to the goods.

The general rule provided by the Sale of Goods Act 1979 is that the risk depends on who owns the goods.

There are a few exceptions to this general rule which are:

• A contract decided between the parties overrides what is written in the legislation
• One party was solely to blame for the damaged goods
• One party does not take reasonable care when handling the goods, making them vulnerable for loss or  damage
• The buyer is considered liable throughout the delivery process known as ‘delivery to the buyer’

The last point may not seem fair as this means despite negligence or recklessness the seller would not be liable to the buyer. However this exception does not apply to the Carriage of Goods by Sea Act 1992.

The buyer should therefore ensure they have negotiated satisfactory arrangements and that who bears the risk is made clear before money exchanges, especially if the goods are very expensive or valuable.

What types of business insurance may be needed for a business?

One way or another, you’re going to need some form of insurance for your business. There will be some policies you may choose purely for peace of mind, whereas others are a legal requirement. As always, seek advice from a business advisor such as your accountant or solicitor on your particular needs.

Here are the different kinds of insurances typically needed by small businesses.

Public liability

This is protection from third party claims caused by injury or death, or damage done to property as a direct result of business activities. This is a necessary insurance if any members of the public, clients or customers ever visit your business premises, however infrequent.

Public liability insurance should also include legal fees and expenses. This cover typically does not include claims made by your own staff. Many businesses are covered for up to £1 million. This is not as much as it sounds, particularly if you could have several simultaneous claims.

Employers’ liability

This only applies if you employ someone and covers claims arising from accidents or sickness, either on or off site. It applies only to employees. The norm is about £10millionof cover, and the minimum is £5million.The certificate of insurance must be displayed somewhere where all  employees can see it.

If you fail to get employers’ liability insurance where it is needed, the Health & Safety Executive can fine your business up to £2,500 per day.

Professional indemnity

This is really for businesses that deliver a professional service, such as accountancy or legal representation. It is a legal requirement for some professions such as solicitors or accountants, but for others, such as an IT consultancy, it is highly recommended for peace of mind. This Insurance protects your business from legal action for amongst other things, breach of contract, negligence.

Directors’ insurance

If you are the director of a limited company you are largely protected against claims. However, you could still be sued in certain situations, such as for negligence. This insurance protects you from such an eventuality.

Motor insurance

A legal requirement for all vehicles. If you use your own vehicle in the course of business, make sure your insurer is aware of this. Otherwise you may find a claim for an accident during work time may not be covered.

Legal expenses

If legal action is taken against your business, this will cover you for court costs and legal fees.

Important questions to consider before starting up a new business

• Motivation
• Business Structure
• Skills
• Funding
• Competition
• Marketplace
• Staff

Practical Tips to make sure you do business on your terms

• Ensure your Terms & Conditions are brought to your customer’s attention at the earliest opportunity. Consider setting out your terms in your brochures, catalogues or other marketing material, on your quotation forms and on your acknowledgement of order.
• Put your T&C’s on your invoices – if there is a course of dealing, this will assist your argument that your T&C’s had been brought to your customer’s attention over time.
• Train your sales staff in your procedures, ensure they have at least a basic working knowledge of the rules of contract formation (offer and acceptance) and the ‘battle of the forms’.