A: Marketing departments are suffering. Budgets have been slashed and some buyers of advertising and other services are looking to get out of contracts.
So it will pay to take steps to protect yourselves from the consequences.
- If you're a client, do thorough investigations into the credit worthiness of all suppliers or customers that are crucial to your department.
- Where you are a supplier, request payment upfront in cash and also director or parent company guarantees of obligations. Ensure these are drawn up by lawyers if you are in any doubt about whether the other party will be able to pay.
- Include payment on the basis of results, where possible.
- In some cases you may have to terminate the employment contracts of staff if the overhead cost cannot be afforded. Make sure this is done within the law following all procedures. The site www.berr.gov.uk has useful guidance from the Department for Business on the procedures to be followed on redundancy and dismissal of employees.
- Tighten up contract procedures and terms, and ensure services provided to the business are clearly described in written contract terms.
- Recover debt and don't let them build up. Often he who proceeds first recovers money. Consider issuing statutory demands, starting legal action and pursuing other parties for breach of contract.
- Require payment upfront, security or even an equity stake. Refuse to provide goods or services if no payment is forthcoming.
On the plus side, now is a good time to pick up cheap assets at firesale prices, databases of companies that have gone out of business or marketing businesses that have gone under.
Q: How should we amend our contracts with suppliers or protect our contractual position?
A: Check you have written terms and conditions. If not, get some signed before placing further work so you have legal protection if things go wrong.
- Investigate how watertight existing contracts are. May they be terminated at will or on long notice periods? Have conditions of purchase drawn up for when you buy direct marketing and other services that include a right to cancel contracts, for example.
- Look at getting out of onerous contracts that cannot be afforded. Check with lawyers if legally binding obligations have been formed or not. Consider the cost of terminating contracts that may be cheaper than continuing.
- Every seller ought to have written conditions of sale reserving ownership of the goods (or intellectual property) until full payment is made. Ensure the written terms apply and are compliant with case law on retention of title. Then if a customer goes bust, you can walk into their premises and take your goods back.
Above all, do not panic. A recession can be as much an opportunity as a threat.
- Susan Singleton is a solicitor with Singletons, www.singlelaw.com.