Home' The Channel Magazine : October 2011 Contents National Newsagent October 2011
About 1987, the downturn in the economy feathered this
competition even further, but once again nobody won, neither
the retailer nor the supplier. More give-aways were conceived
even as more retailers went out of business and had excruciating
penalties to pay out of the sale proceeds of their business to
satisfy the liabilities they had brought upon themselves by
entering the ‘give away frenzy’.
CONTRACTS: RIGHTS AND
There is nothing objectionable about a contract. If you receive
something tangible or a right for no charge, then the offeror
(read supplier) has a right to something in return, which is
usually a fixed (or in some cases a variable) period in which to
supply their product on specified terms.
All contracts are made up of rights and obligations, include a
value for the right which is legally termed ‘consideration’, which
can be cash or some other valuable asset or right.
Contracts which are negotiated between parties with a
complete understanding of their rights and opportunities will
generally produce a fair and just contract.
Unfortunately, in this industry even though the vast majority
of contracts are legal and enforceable, the element of justice and
fairness to both parties is no longer a principle factor.
There are unlimited ways to bring about a fair and just
arrangement between the suppliers and retailers where both
should be protected against the failure of the other party. Having
said this, I know of no contracts from any supplier that spell out
their responsibilities in such a manner that they can be held
responsible. In fact, one even contracted out of responsibility
in the event their company was wound up. The problem here is
that the retailers do not insist on having any input to standard
contracts that they have to abide by. The adding of clauses and
deletion of clauses and penalties can be done at the stroke of a
pen by a retailer, so how about that!
Retailers must appreciate that the more they demand from
suppliers, they will have to pay, one way or another — there is no
free lunch in business negotiations.
VITAL ELEMENTS OF A CONTRACT
Contract or is it an Agreement?
An Agreement can be broken at any time without any
consequence. Yet there are retailers out there who have signed
Agreements to Supply and think they are contracts. Agreements
without consideration along with all the essential elements of a
contract can be avoided if you wish without penalty. What about
Agreements to marry, they’re called engagements, how many of
those do you know that have been broken without penalty.
What then is the difference between an agreement and a
legally enforceable contract??
To be a legally enforceable contract
the following elements, at least, must
• There must be an Offer
• There must be an Acceptance
• Both parties must have a capacity to Act (legally able to do what
the contract says)
• There must be legality of the object (eg cannot invoice without
GST, cannot sell fireworks etc.)
• Last but most important, there must be ‘Valuable
Consideration’. It can only be in the present or future, it cannot
be something completed in the past. Consideration is measured
as pecuniary (money) value. However, just as an aside and to
add nothing to this article, the courts have held that valuable
consideration can be “natural love and affection” .
Please go to your drawer where you keep contracts and check
them out for being legal and enforceable. I have come across
many that are not.
The first benefit sought by retailers or even offered by
suppliers is fixtures. These are expensive items which will cost
between $800 and $1200 per metre, and can cost between $7500
and $30,000 in newsagencies. To expect a supplier to provide
these assets (which are useless elsewhere) without either
withholding some alternative benefit that may be more profitable
to the retailer, or applying a penalty clause in case of default, is
unreasonable. The mere acceptance of the need for fixtures is
in a large number of cases unnecessary and will end up costing
the retailer at least the value of the fixtures over the term of the
contract. Often, the retailer could have his fixtures refurbished
for a minor cost between $2000 and $7000. It would be better
for the retailer to carry this cost and negotiate a better pricing
arrangement with the supplier. There are many other aspects
of good management that can be considered through the direct
ownership of fixtures which should be considered long and hard
before accepting the liabilities that come with penalty clauses.
After all, none of us can predict the future and our stability, be it
through business misfortune, external influence or ill health.
The industry was, and still is, in a mess.
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