Contracting with large companies
We have advise professional consultants and suppliers of goods and services regarding contractual negotiations with large corporations such as Rio Tinto and BHP.
Large corporations will almost always have standard documentation that they use when dealing with consultants and suppliers. Many people will simply sign these documents without paying any attention to the detail of them apart from the schedules which outline the particulars for their work. Often the reasoning for this will be that “this is the contract that they always use for everybody so it must be fine”.
While it is true that in most cases, large corporations will have well developed precedent documents that will have been refined over the course of a large number of transactions and which cover a broad range of circumstances, the reality is that there will almost always be some clauses which will be inappropriate for the particular circumstances of any transaction (particularly if it is the first time you are entering into a transaction with a particular large corporation). Every business will have a number of different contractual relationships already in place which can bring a consultant or supplier into conflict with the standard terms of a precedent contract, often with dire consequences.
Some examples of the issues that can arise are as follows:
- Sub‑contracting: the client may have the right to refuse particular sub‑contractors, some of who may be essential to your performance of the work;
- Delays: definitions of excusable delays may not cover particular issues which are possible (or even likely) to occur in a particular job you are performing potentially leaving you exposed to a breach of contract with flow on consequences which could include large liquidated damages claims.
- Insurance: some standard contracts may contain clauses which will allow insurers to make use of particular exclusions under your policy to avoid paying particular claims in relation to work performed under that contract. Often the results of any such issue will be that you are left with a claim against you for which you are uninsured for a quantum which would result in insolvency or bankruptcy.
- Assumption of Liability: the contract may ask for you to assume liability for some things which are completely out of your control or which you otherwise do not wish to be liable for. In some circumstances, the risks will be such that you may not wish to perform the work (or may not wish to perform it at the quoted price).
In many cases, the corporation you are contacting with will understand that not every contractor will fit exactly within the terms of their standard documentation and provided that you can clearly convey the reasons why particular changes to a contract may be necessary or beneficial, then often an amendment can be negotiated which suits both parties.
When we have acted in these matters in the past, we have been able to identify risks for our clients and items in the contract that may conflict with the way they carry on their particular business and in most circumstances we are able to negotiate amendments to the contract which end up saving them large amounts of money or significantly reducing their risk and exposure in relation to a particular project.
If this review and amendment process is not done, and a contract is entered into on the assumption that “this is the way they always do things” often it will be the contractor who suffers the consequences of some unforeseen issue with the contract which could have been easily prevented.