A Guide to Contracts

Whenever you buy or sell, you’re entering into a contract – a legally-binding agreement. All businesses need to be aware of their basic obligations under contract law.

You have a contract when:

  • Both buyer and seller agree to make a contract
  • An offer is made and accepted
  • Something of value (‘consideration’) is exchanged. For example, the seller’s product for the buyer’s money

As well as this, individual consumers have rights as follows:

  • goods must match the description given
  • goods must be of ‘satisfactory quality’
  • goods must be fit for the purpose they were sold for
  • services must be carried out with reasonable care and skill
  • services must be completed within a reasonable time and for a reasonable price if these have not been agreed in advance

For sales to other businesses, these rights can be excluded by the contract but not unreasonably.

If you’re selling goods – to consumers or other businesses – you’re definitely wise to talk to a solicitor about your obligations. They can help you draw up a written contract, so you’re protected if things go wrong.

Importing and exporting

This guide can’t give a full overview of everything you need to think about when trading overseas. The best thing is to do your research, and take professional advice.

Here are some of the things to consider:

  • VAT and duty – if you’re buying goods from overseas, you may have to pay VAT and import duty, as well as excise duty for goods like alcohol and tobacco. If you’re exporting, you might have to pay overseas customs duties and taxes.
  • Financing – there can be greater risks when trading internationally. Look into secure payment methods, such as letters of credit. Also think about the dangers of exchange rates fluctuating, and how you can manage this.
  • Logistics – who’s responsible for handling, storage, transport and delivery of the goods, and what happens when they get to Customs.
  • Relationship management – how to manage the relationship with a buyer or seller overseas, especially if you don’t speak the same language.
  • Legal issues – look at the local legal environment and make sure any agreements are enforceable in both countries. If your trading partner is breaching local laws when they buy or supply your goods, you may not be able to enforce the contract.
  • Licensing – you might need a licence to export or import some sensitive goods, such as chemicals, plants and animal products, and medicines.
  • Local regulations – if you’re exporting goods, they’ll need to meet local safety regulations, quality standards and any other regulations – eg on product labelling.
  • Intellectual property – make sure the goods you import or export don’t breach local IP rights such as trademarks

There are lots of sources of information and help for businesses that import and export. Good places to start are UK Trade and Investment, the British Chambers of Commerce and your trade association.

Dealing with suppliers

If you’re taking on a supplier, it’s important to think carefully about your specifications (precisely what you need from them) before starting. Talk to different suppliers and make sure they can supply what you need.

If you’re planning to have a long-term contract with your supplier, remember that quality of service and a good working relationship may be more important than getting the very lowest price.

When you’ve found the right supplier, negotiate a written contract. This sets out what has been agreed so everyone knows what to expect. The contract could include:

  • what exactly is being supplied
  • the standard of service expected
  • their responsibilities and yours
  • delivery schedules
  • payment methods and terms
  • confidentiality
  • what will happen if things go wrong

If the supplier breaks the agreement, you should be able to get compensation.

Review the supplier’s performance regularly to make sure you’re still getting the best price and quality. Remember you also have a responsibility to them – for example, to pay them on time.


This article is provided only for general informational and educational purposes. It is not offered as and does not constitute legal or other professional advice on the subject matter in question. You should not act or rely on information contained in this website without first seeking professional advice on the subject matter in question.