As a business owner you must understand the risks you’re exposing yourself to when you sign a contract. All too often, enterprises sign a contract to win business or secure a supplier without really being clear about the ramifications if they, or the counter party, fail to meet the terms of the the agreement. This can have life-changing consequences for a business and the business owner.
The following is an actual claim from a building subcontractor in Australia who didn’t see the need to have his contract reviewed.
“A builder sub-contractor won a job to do some work on a large company’s factory complex. The builder did not appreciate that the contract he signed included an indemnity to the customer to reimburse any costs the factory owner may need to pay for any claim, dispute or actions arising at the construction site.
During construction, a delivery vehicle, driven by one of the factory’s employees, struck and injured two workers who were not employed by the factory or the builder contractor. The injured workers claimed under their WorkCover insurer. WorkCover, in turn, sought it’s costs for the injury from the factory owners. The factory owners, citing the contract, sought payment from the builder subcontractor owner.
He claimed this was not fair. But the courts found the contract was valid and he was ordered to pay $700,000 under its terms, plus legal fees for the court case. He attempted to claim under his business insurance policy, public liability section, only to find the exclusion clause prevented him from doing so. His insurer refused to pay the claim. Not only did the business fail, the builder lost his family home. “
What this shows is that contracts like this can result in risks being transferred to a business or an individual. These risks need to be fully understood before you enter into any contracts. Some risks can be insured whilst others are uninsurable. Even with a general liability insurance policy in place, liability arising from the terms of a contract may not be covered under the policy. This is where insurance brokers can play a vital role.
At no charge we offer a contract review service 100% free of charge by our legal team, The Fold. This will identify any potential liabilities the contract represents and recommend changes to the contract and your insurance policies to reduce your exposure.
Follow our link to our checklist with questions that you should consider before signing a contract.
Our specialised liability brokers can help you work through these questions. The better we understand your business, the better they can work with you so we can genuinely meet your needs and provide tailored cover at an affordable price.