Five things to update in catering contracts

  • Corporate catering contracts

Whether it’s sandwiches for a small meeting or a cocktail party for five hundred, we’ve picked out five things which every corporate catering company should check in their customer contracts and paperwork.

1. Who’s paying you?

You need to know who you’re entering into an agreement with. If you don’t know, the catering contract might be unenforceable and you’ll struggle to chase up payment.

Here’s what can get in the way:

  • You’re dealing with a personal assistant, receptionist or someone who’s been roped in to arrange a function, rather than the owner or director of the business.
  • There’s an argument over whether the person you dealt with has authority to sign the contract.
  • You don’t know the identity of who (or what) will ultimately pay the bill.

Some ways of fixing that:

  • Get the customer to complete a form which asks for:
    • the business name;
    • the company name; and
    • its ABN.
  • Once you have the ‘identity’ of the business, check it via ASIC Connect and ABN Lookup. Does the information match?
  • Make sure the person you’re dealing with has authority or take other steps to ensure payment.
  • Keep it simple: get paid in full before delivery or the function.

2. Acceptance

It’s essential that the customer accept the terms of the catering contract.

It doesn’t need to be spelled out unless there’s a risk of doubt as to whether or not the customer has accepted the terms of the catering contract. Here are some examples where there’s some doubt on when and how the customer agrees to the terms:

  • Paying the deposit or final payment?
  • Placing the order or confirming final numbers?
  • Filling out an order form, returning a signed copy of the contract, or taking delivery?

Most of the time, there won’t be an issue with this. It’s when there’s an argument that you might hear “well, I didn’t agree to that” – particularly when there’s a cancellation or a dramatic change to final numbers.

3. Confirmation

The key here is clarity. The contract with the customer should state:

  • by what time final numbers, quantities or hours are required; and
  • what happens if there’s a late change or if the order drops below minimum numbers.

4. Dealing with cancellations and deposits

If the customer cancels the contract, you may be entitled to keep a deposit or charge a cancellation fee. It’s a similar concept for taking a deposit when booking a table at a restaurant.

However, it’s important that the deposit kept is a genuine pre-estimate of the loss, or any cancellation fee charged is the actual loss suffered. A clause which tries to keep or charge more will risk being a contractual penalty and be void.

How do you work out that loss? As a guide, balance wasted staff time and produce against the likelihood of another customer absorbing that waste. That will likely depend on when the customer cancels – which shows the importance of confirmations. A cancellation fee that ratchets up may be appropriate.

Once you have a good estimate of that loss, make sure that the contract is clear.

5. Payment terms

If you’re not requiring payment upfront, specify when each milestone payment is required:

  • any deposit or first payment;
  • any payment on confirming numbers; and
  • final payment.

You have a lot of flexibility as long as it’s properly documented. It’s that balance of keeping customers happy and reducing the financial impact if a customer fails to pay.

Make sure your documents are consistent. It’s disheartening to see contracts which say 30 days and invoices which say 90 days. Double check them.

You may want to consider requiring payment before delivery or the function from new customers.

What’s next

That’s just five matters we’ve picked out for corporate catering contracts. There are plenty more things to consider: GST, indemnities, warranties, food allergies to name a few. Those dealing with household or personal catering have some different considerations. Get in touch to have us review your catering contracts.

By | 2017-06-01T13:06:23+11:00 8 August 2014|Categories: Guides|Tags: , , , , |

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