Examples of Contract Reviews

Assisting you with Contract Negotiations / Control of Contractual Risk

1. Contract Negotiations

Our clients consistently inform us that they find the Contract Review service provided by UK & Global to be increasingly valuable.

Contract Reviews help our clients with the following:

  • Gain a better understanding of the Liabilities and Indemnities which may be assumed wittingly or unwittingly under contract
  • Identify specific clauses / wordings on which the client refers back to their Customers to remove or improve; and
  • Enable them to make informed decisions on how they may best mitigate contractual risks

The Reviews we have undertaken on behalf of our clients have led directly to:

  • improved and / or less onerous Contract conditions
  • wider or higher levels of Insurance protection
  • reductions in premium where risks have been assumed by other parties to the Contract

We primarily focus on the following 3 elements:

  • Our client’s own terms & conditions
  • The Customer’s / Purchaser’s terms & conditions
  • The terms & conditions of the Suppliers who provide goods / services to our client

We assess and analyse the following on behalf of our clients:

  • Our client’s current exposure to Contractual Risks
  • The client’s current internal procedures to manage Contractual Risks
  • The most suitable methodology for improving how Contract Risks are reviewed by the client’s Directors and Managers

2. Control of Contractual Risk

We assist our clients in establishing Contract Risk Review Frameworks in order to simplify internal procedures and reduce exposures to Contract Risk.

UK & Global undertake the following:

  • Initially provide a clear understanding of the client’s Contract Process stages
  • Development of a Process Flow chart for reviews of Insurance and Indemnity clauses to support our client’s internal procedures
  • Development of a list of “Do’s and Don’ts” with clear instructions on those Contract wordings which are deemed acceptable, unacceptable or need to be referred to Insurers
  • Provision of a glossary of Insurance terms with brief explanations

The overall objective is to mitigate the risk of significant or catastrophic loss which may be unnecessarily or unwittingly assumed under contract and, in turn, to help streamline procedures and reduce administrative costs.

Example 1 — Crane Hire

A client hired a Crane to assist with some movements on their own site.

Upon enquiry, it transpired that the Crane had a replacement value of £500,000 and the client had not arranged Insurance cover either via the Plant Owner or through their own Insurance programme.

In addition it appeared that there were no standard internal procedures for the client’s personnel to follow regarding the authorisation of Plant Hire and for the review of Plant Owner’s terms and conditions.

We discovered that the Plant Owner insured the Crane but made the client responsible for the policy excess under the Plant Owners Insurance cover which was 20% of the replacement value of the Crane.

In this instance, the absence of formal internal procedures for reviewing Plant Hire contracts exposed the client to a potential liability of £100,000 had the Crane sustained substantial damage whilst under the client’s supervision.

Example 2 — Stock Damage in Warehouse

Our client used a number of external companies for the storage of Stock. The client was advised of an incident involving damage to Stock to a value of approximately £34,000 at a Warehouse premises.

Upon enquiry by UK & Global, the Warehouse Keepers advised that any payment in compensation would be limited to £100 per tonne in accordance with Warehouse Keeper’s Liability terms & conditions.

This would be considerably below the £34,000 loss sustained by our client.

It transpired that our client was unaware of the Warehouse Keeper’s limited obligations under contract and the considerable risk this placed on our client in respect of the storage of Stock.