Insights Agreements
Five terms that decide whether you actually get paid
A supply agreement is usually read once, for the price, and signed.
The price is the least interesting number in it. What decides whether the business survives the contract is the machinery around the price: when payment falls due, what has to happen before it does, who decides whether it happened, and what you can do when it does not.
Five terms carry almost all of that.
1. When the clock starts
“Thirty days” sounds specific. Thirty days from what?
From delivery, from invoice date, from receipt of invoice, from acceptance of the goods, or from the end of the month in which the invoice was received? The last of those can turn thirty days into nearly sixty, lawfully, with nobody doing anything wrong.
Find the trigger. Then work out the real average gap between doing the work and having the money, and ask whether the business can fund that gap.
Ask: if I deliver on the 2nd, on what date are you obliged to pay?
2. What has to happen first
Many agreements make payment conditional on something else: a signed delivery note, a goods-received voucher, an inspection, a sign-off from a named person, a purchase order number quoted on the invoice.
Each of those is a reason an invoice can sit unpaid without being disputed. The most common cause of a late payment is not refusal. It is an invoice that was never valid in the first place and nobody mentioned it.
Ask: what exactly makes an invoice payable, and who is the person who confirms it? Then build your own process around that answer.
3. Who decides whether you performed
Look for a clause giving the customer sole discretion to determine whether the goods or services conform. Where it exists, the customer is both the buyer and the judge of whether you are owed.
That is not automatically unacceptable — large buyers often insist on it — but it should be balanced with something: an objective standard, a time limit on rejection, a right to cure a defect before the order is cancelled.
Ask: how long do you have to reject, and what happens if I fix the problem inside that window?
4. What late payment costs them
If nothing happens when payment is late, late payment is free, and free things get used.
Interest on overdue amounts, the right to suspend further deliveries, recovery of collection costs: any of these change the incentive. The right to suspend is usually the most effective, because it affects the buyer’s operations rather than their account.
Be careful about suspending without a clause that allows it, though. Stopping delivery on a contract that does not permit it can put you in breach rather than them.
Ask: what am I entitled to do on the day payment is late?
5. How it ends
Three things to find before you sign.
Term and notice. How long does this run, and how much notice does either side need to give? Notice that is short for them and long for you is common and is worth naming out loud.
Exclusivity. If you agree to supply only them, or not to supply their competitors, you have concentrated your revenue by agreement. That may be worth it for the volume. It should be a decision, not a surprise.
What survives. Confidentiality, restraint of trade and outstanding payment obligations usually continue after the agreement ends. Check what you are still bound by a year after the relationship stops.
Ask: if this is not working in eight months, how do I get out and what do I still owe?
The cross-check that catches the rest
Take the agreement and your bank statements and answer one question: on this contract, how many days between doing the work and having the cash?
Then ask whether you can fund that gap at the volume being discussed. A contract that is profitable on paper and fatal to cash flow is the most common way a growing business runs out of money while winning more work.
The terms above are the ones that move that number. They are all negotiable at the start and none of them are negotiable once the first invoice is late.
This note is general information, not advice on your situation, and it is not legal advice. If an agreement has landed on your desk and you want the terms set out plainly before you sign, that is work we do.