3 Hidden Traps in Contracts With Foreign Suppliers

Key questions

A contract with a foreign supplier often runs to dozens of pages, and the decision to sign is made quickly. The biggest problems often sit in three clauses that are easy to skip, in English and in small print.

This is not a story about a dishonest supplier. It is about what happens when we sign something we do not fully understand. So before signing, it is worth asking three groups of questions.

What it looks like in numbers (an imagined example)

Imagine a 42-page contract, signed in 20 minutes. The three skipped items are on pages 12, 23 and 38.

Imagine the three items together cost EUR 47,000 in the first year. None of them was especially hidden.

1. The illusion of exclusivity and online sales

A contract can give you exclusivity for a territory and, at the same time, allow the supplier to sell directly to customers online. On paper you have exclusivity. In practice you compete with your own supplier.

Questions before signing: does the exclusivity also cover online sales? Does it cover marketplaces, direct customer enquiries and sales by the supplier's affiliates?

2. One-sided price increases with no deadline or limit

A clause saying the supplier may change the price looks harmless if it has no deadline, reason or limit. The problem starts when you have already made an offer to a customer and the purchase price changes with no time to react.

Questions before signing: what is the notice period for a price change? How is the price changed? Is there a maximum increase? What happens to orders already confirmed?

3. Unclear responsibility for defective and near-expiry goods

When the contract does not say who bears the cost of returns, storage, replacement and destruction, the problem is usually solved only when it arises. Your negotiating position is then weaker, and the cost easily stays with the distributor.

Questions before signing: who pays for returns? Who organises collection? What is the complaint deadline? Is storage cost recognized? How are goods approaching expiry handled?

4. How to answer these questions

The answers are also found outside the contract: in the supplier's practice, in the market and in your own numbers. Before signing it helps to look at the decision from several angles, and the questions in this text are a good starting list.

For each question write down what the contract says, what you assume and what still needs checking. If most answers are assumptions, the signature can wait until you have checked them.

Warning

This article is a business analysis, not legal, tax or financial advice. The decision is always yours.

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