The Risks Arising from the Acceptance of Contracts for Services
A fundamental point in contracts for work and services is the acceptance. This refers to the step in which the buyer confirms that they are satisfied with the “work” that has been produced. At this point, among other things, the term and period of the contract begin, and payment is authorised. At this point, there are pitfalls that you can not only quickly step into, but which can also become expensive. To prevent this from happening, you should ask yourself the following questions in advance:
How is acceptance carried out and does a deadline have to be set for this?
As a rule, the acceptance must be documented in writing through a declaration of acceptance. This is essential in order to be able to prove acceptance in a legally secure manner in the event of contradictions arising in the future. Furthermore, it is advisable to bind the acceptance to a deadline. The reason for this is that it can put pressure on the buyer to declare acceptance. Otherwise, from the buyer’s point of view, it can theoretically be delayed indefinitely. The payment deadline is irrelevant, as payment is only deemed due upon acceptance.
Here is an example:
Company A and B have signed a contract for work. A has completed the work and made it available to B for acceptance and subsequent use. However, B does not declare acceptance directly and delays it. After tough negotiations and a rectification on the part of A, acceptance is declared 4 weeks later. The payment period is 30 days.
B could thus easily delay payment and save money. A, on the other hand, has been paying in advance since day one and is now waiting even longer for the money. It is therefore important to bind the acceptance to a deadline.
Another pitfall is the determination of the how the acceptance will be:
Should the acceptance take place separately for each project phase or should there be an overall acceptance at the end?
From the client’s point of view, it is a classic to stipulate in the contract that an overall acceptance shall take place at the end. The consequence of this is that payment is only made at the end of the project and the client has to pay in advance until then. From the contractor’s point of view, it makes sense to agree on certain partial steps that are linked to interim acceptance and interim payments. In professional terms, this is referred to as “milestone agreements”. Depending on the total time required, several of these “milestones” are recommended.
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