10 key points to think about when entering into a contract

10 key points to think about when entering into a contract

Schools enter into contracts on a regular basis. Whenever goods or services are purchased, a contract is created and it is important that you agree to and understand the terms and conditions of that contract before signing up.

Schools should consider in particular:

1. The procurement process

Before entering into any contract, you should ensure that the DfE’s procurement guidance (available here) has been followed. Bear in mind that for very high value contracts (with a value in excess of £181,302 for goods and services and a value in excess of £4,551,413 for works), you may also have to comply with EU procurement rules. These are often complex and you should always seek legal advice if you think they might apply.

2. The term of the agreement

Many types of contracts commit customers to a minimum term and that term will often automatically renew unless notice is given in advance. The term of the contract should always be checked and, where appropriate, negotiated. If the term of a contract cannot be negotiated, you should ensure that you diarise any key dates (such as when notice to terminate needs to be served) to avoid any unwanted automatic renewals.

3. Service standards

When procuring services (for example catering services or the services of a consultant), it is important to consider what standard of service you are expecting and whether this is reflected in the contract. As a minimum, all service providers should agree that in the performance of their services they will exercise reasonable care and skill appropriate for someone in their industry, but sometimes more detailed service levels and key performance indicators (KPIs) should be included. Consider whether you should have the right to terminate or receive a refund or discount if certain KPIs are not met.

4. Warranties

When purchasing new equipment, check what warranties the supplier is giving in relation to the equipment and the duration of those warranties. If purchasing equipment that you expect to last long-term, you may need to negotiate an increased warranty duration.

5. Price and payment

Depending on the nature of the agreement, the price you are paying could be subject to change. Always check if the price you are paying is fixed for the term of the agreement and, if not, check when it may increase and by how much. Also check whether a price quoted is inclusive or exclusive of VAT the payment due date.

6. Termination rights

Termination rights are particularly important in relation to long-term or high value contracts and any contracts for essential services. You should have a right to terminate if the provider repeatedly breaches the agreement or breaches a material term. If appropriate termination rights are not included, it could be very difficult to terminate the contract early if you are not happy with the standard of service being provided. The contract should also clearly state what happens at the end of the term (e.g. return of the supplier’s equipment or the removal of items by the supplier).

7. Confidentiality

If you will be sharing confidential information with a third party (for example, a consultant), you must ensure that the contract deals with confidentiality and that the third party is under an obligation not to disclose the school’s confidential information to anyone.   

8. Data protection

If you will be sharing any personal data under a contract, it is essential that the contract includes GDPR compliant provisions.

9. Insurance

Check what the contract says about insurance and consider whether there needs to be an obligation on the contractor to take out and maintain insurance. Request evidence of insurance, where applicable.

10. Liability

Check what the limitation on the contractor’s liability is in the event that something goes wrong. Depending on the nature of the contract, you may need to negotiate an increase to any cap on the contractor’s liability. You may also need to consider including a cap on your liability.