What should my golf club sign before entering into a contract?

By Alistair Dunsmuir January 18, 2019 10:48 Updated

Entering into a contract with a third party is a regular necessity for all golf clubs, but often something goes wrong and the club wishes the contract had been worded differently. Here, the NGCAA presents the questions that should be asked before signing.

Our golf clubs very often take advice from us about contracts when they are unhappy with the performance or delivery of the other party. Sometimes the club is simply looking for a way out, because they find that the contract has become too expensive. Our advice is frequently given at a point in time well after the negotiations and signatures took place, when the club will often remark ‘what if?’ when it looks at the agreement that it has.

It is useful for the club to think about contractual detail before it signs on the dotted line. Whilst this article highlights the key issues that a golf club should consider during contract negotiations, a club should always take legal advice from a lawyer when negotiating a contract, especially when it comes to reducing the agreement to writing.

Who is the other party to the contract?

What is the reputation of the other party? Has the club or any of its members done business with the other party before?

Consider doing a credit check if the other party is ‘an unknown’.

Is there anyone else that is vital to the deal? If so, consider whether they should be made a party to the contract as well, so they are also bound.

Is the identity of the other party important to the performance of the contract?

Are there specific individuals that the club wants to perform the services?

Is the club happy to allow the other party to sub-contract some or all of the work or pass on the benefits of the contract to others? If not, this must be made clear in the contract. If so, is this to be subject to prior written consent?

If the other party is a company, would the club object if ownership changed, for example, if a competitor took control? If so, what provisions should go in the contract to address this situation?

What is being bought or sold?

The majority of contractual disputes relate to what services are to be performed or goods delivered.

Describe the goods and services as clearly and accurately as possible to avoid risk of disputes.

Any important issues and assumptions should be confirmed in the contract. Do not rely on verbal assurances or points agreed during negotiations.

List what the other party should and should not be doing regarding the services or goods being sold under the contract.

What is the price and how is payment to be made?

Is it a fixed sum? If not, how is it to be determined?

If the price is linked to variable factors, what are the mechanics for determining the price and at what points during the term of the contract will the price be determined?

Is tax included in the price (notably VAT)? Take tax advice if goods or services are being delivered or performed in another country to ensure there is no unexpected tax liability.

What are the delivery terms? Are delivery costs included in the price?

How is payment to be made (for example, cash, electronic bank transfer or bankers’ draft)?

When is payment due? Is it a single lump sum or by instalments?

Is the price conditional or to be paid in stages? If so, any preconditions to payment should be clearly set out.

What happens if things go wrong?

What could go wrong with the deal and what loss could the club suffer as a result? Consider all possible consequences. For example, could the club be prevented from fulfilling obligations to another company and face financial penalties as a result? Could reputational damage be an issue?

If the club is buying goods and services under the contract, try to ensure that the seller is responsible for all possible losses and that liability is not limited in any way.

If the club is selling goods and services, try to limit liability to a fixed sum. Damages for breach of contract may be far greater than the price and hard to quantify. Check that liability is covered by insurance.

Is the deal time-critical?

When does the club want the work done or goods delivered?

A clear timetable is essential, especially if price is tied to delivery or performance dates. Deliverables, and pre-conditions to performance, should be clearly specified.

Does the club want to be able to end the contract or to impose a financial penalty if work or goods are delivered late?

In what circumstances might the club want to pull out of the contract?

How long does the club want to be tied to the contract?

Should the contract be for a fixed period or does the club need to include a right to terminate by giving notice to the other party? If for a specified period, should the contract renew automatically or on notice?

Are there any circumstances in which the club may want to terminate the contract immediately, for example, if the other party damages the club’s reputation or goes bust?

Should there be a fee for early termination, reflecting the investment that the non-terminating party has made in the contract?

Are there any brand, copyright or other intellectual property issues?

Is the other party creating something specifically for the club (for example, an advertisement or bespoke computer software)?

Is the club going to use the other party’s brand or will the other party use the club’s brand? If so, clear, comprehensive and strictly monitored contract provisions governing such use will be needed to avoid possible brand damage.

Is there a payment, performance or enforcement risk?

Remember that if anything goes wrong, the protections in a contract are only as good as the person giving them. If they have no money it will be very difficult to get any compensation. Consider requiring security (for example, a guarantee or retention).

Is the club dealing on standard terms?

Most companies have standard terms of business drafted in their favour. If a business’ terms conflict with the other party’s, it will be difficult to decide which terms will apply.

Be wary of purchase orders or delivery notes. These can have a party’s standard terms of business included on them. By signing a delivery note, the club may inadvertently commit itself to the seller’s terms.

Always be clear about the terms on which the club is dealing. If in doubt, take legal advice.

Finally, there are also points to consider in international situations. Price: in what currency is it to be paid? If the currency is volatile, consider hedging against any exchange rate exposure. Is there likely to be an exchange control issue in remitting payment from the country concerned? Payment: Consider using a letter of credit or payment guarantee. Conduct credit searches on payers and guarantors and obtain bank and commercial references where possible. Ensure compliance with applicable laws both in the UK and the country where the contract will be performed, including anti-corruption measures and laws specific to the subject-matter of the contract. Consider which mechanism is most appropriate for resolving disputes. Consider specifying arbitration (private, neutral, internationally enforceable) rather than immediate recourse to the courts of another country.