Those of us with a spare 45 minutes on a day off or on a lazy Sunday afternoon might find ourselves watching a certain programme on BBC1 that involves fans of antiques hunting for bargains. A common question asked by the participants is, ‘is that your best price’? In a commercial context how can a buyer seek to ensure they are in fact getting the ‘best price’?
Imagine the scenario. The head of purchasing at company A is ecstatic that they have managed to do a fantastic deal with a supplier to buy widgets from them for £1.00 each. Even better the price is fixed for 18 months.
Sometimes, the cheers can turn to groans when it is discovered that a similar sized competitor has managed to buy the very same widgets from the very same supplier for £0.75 each, meaning that company A is locked in to paying 25% more than its main rival for 18 months.
How could this situation have been avoided?
One solution would be to recruit a better head of purchasing, in which case you might need a referral to one of our employment lawyers.
A better alternative, which would have avoided the problem altogether would have been to seek to negotiate a ‘most favoured customer‘ or ‘best price’ clause into the contract.
You may have heard of this type of clause as they are rumoured to exist in a slightly different guise in the contracts of top level footballers, so that if the club pays a new recruit more than their current star player, the star player’s wages have to increase to match them.
In a commercial context, the clause is quite simple really. In essence it requires the supplier to (in our example):
- Offer to company A the same (lower) price that it offers to a comparable customer (because clearly a bulk buyer can often negotiate better terms) for as long as the lower price is available.
- Refund any difference to Company A where company A has already paid the higher price for a period (this is likely to be difficult to negotiate in the real world).
- How will you know that someone else is getting a better deal? Incorporate into the contract an obligation on the supplier to tell you.
For advice and assistance on commercial contracts, please do not hesitate to contact us on 0161 832 6131.
This blog was written by: Michael Stewart
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.