Posted on Jun 12, 2019 in Healthcare by Michael Royden
We have reason from time to time to ascertain what contracts our dental clients have with third parties. It may be in the context of a practice sale, or more generally where they require advice on a specific issue. The most common answer we receive is that they don’t have any contracts. Is that the case? Most certainly not.
The reason that they give this answer is that the term “contract” conjures up an image of a formal document signed by both parties. However, a contract in legal terms is a much simpler concept that that. It encompasses every arrangement which two or more parties enter into. The most obvious examples in a practice are:
- Supplier arrangements eg the terms of purchase of materials
- Services – a practice takes services from lots of external parties, examples being alarm companies, fire safety inspections and HR services to name a few
- Equipment supply – every agreement for lease/hire (or indeed purchase) of equipment is a contract
Contracts do not need to be in writing – any agreement where one party undertakes to provide goods or services to another in exchange for payment is a legally binding contract. It is of course more difficult to prove the terms of a verbal contract but writing isn’t essential for a contract to be formed.
In turn, it can be very easy to agree to the terms of a contract without realising what you are agreeing to. A very common example of that these days is most purchases over the internet. When you buy a product or service, most websites will present you with a box which you tick to say that you accept the seller’s terms and conditions of sale. This is the equivalent of the small print in a written contract, and you usually won’t be able to complete the purchase without clicking that box. Many people simply don’t read those terms and conditions, but may live to regret it if an issue arises later and they find that the conditions of sale contain something which they are unhappy about.
So what, say many. There isn’t any point reading standard terms and conditions, it’s a take it or leave it situation. That may be the case in small purchases, but for more substantial purchases, it isn’t unheard of for a buyer to agree some specific terms with a seller. If you don’t ask, you don’t get! In turn, even if the terms are non-negotiable from the seller’s perspective, if you are unhappy with them you still have the option to buy elsewhere.
One key area which arises, particularly in the context of services contracts, is auto renewal. This is a very regular issue in contracts with providers of HR advice services, although it is seen elsewhere too. We find that clients may have signed up to take HR advice from an external agency for a period of a year or two, but for whatever reason don’t wish to continue at that end of that initial period. They then tell the agency that they aren’t continuing, only to receive the response that the contract has auto renewed as its terms require the practice to have given written notice at an earlier stage and the contract has rolled over, sometimes for the same period again. That never goes down well with the practice who clearly had a reason for wishing to move provider.
Unfortunately, if the auto renewal wording is clear in the contract, it will be valid and would need to be complied with fully in order to terminate the arrangement. Providers in this situation generally play hard ball and insist that the practice stay or alternatively buy themselves out of the contract. It is therefore very important that practices carefully read such contracts, diarise dates for termination if they decide to move, and comply fully with the notice requirements of the contract.
Contracting isn’t about formal legal documents, practices enter into contracts every single day, some short and routine, some longer term involving substantial expenditure. Paying attention to the small print can pay dividends, and where appropriate don’t be scared to seek advice on a contract before signing up to it.
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