Commonly Made Mistakes To Be Avoided When Getting Into Business Gas Supply Contracts

Commercial gas prices, as indeed all fuel prices

, tend to be very unstable. Certain seasons are characterized by very low prices, with certain other seasons being characterized by very high prices. Even where there are no extremities in this instability, we still tend to see considerable variations in day to day business gas prices. Some business people don't like this as it makes it hard to, among other things, undertake proper business planning. Such entrepreneurs and managers will therefore tend to look for ways via which they can ensure commercial gas stability. And one of the ways through which this can be attained, which is also the most commonly endorsed way, is through the use of commercial gas supply contracts.

When you enter into one such business gas supply contract, the agreement between you and the gas supplier is for them to be supplying you with gas, for a given duration of time, at a given (stable) price. Effectively employed, this method can help do away with the instability which is characteristic of gas pricing.

Unfortunately, it is not always that these business gas supply contracts work out well. And where the contracts don't work out well, there tends to be one or another mistake made. A look over these commonly made mistakes over time has led to this compilation of things to be avoided, when getting into business gas supply contracts.

Now the first mistake to be avoided, when getting into such business gas supply contracts, would be the very simple and obvious mistake of getting into such a contract with the wrong supplier. This is a very commonly made mistake, the simplicity and obviousness notwithstanding. When we talk about a wrong supplier, we would be looking at, for instance, a supplier who is obviously unreliable. Unfortunately, many people, when making selections in situations like these, will tend to opt for the lowest bidders in the tenders; without pausing to think of other things like reliability. The end result is a situation where a business ends up experiencing major gas supply hitches, with serious consequences to its productivity.

The second mistake to be avoided, with regard to business gas supply contracts, is that of entering into contracts under the impression that gas prices can only rise in the future (leading to a situation where one takes on a very unfair gas price). The truth of the matter is that commercial gas prices are very unpredictable, and in any given situation, they could either go higher up, or go lower down. This creates the need to opt for a reasonable fixed price, which protects your interests in case of the market prices going down, while also protecting the supplier in case of market gas prices going up.

The third mistake to be avoided, with regard to business gas supply contracts, is that of entering into contracts without reasonable exit clauses. This is a mistake many people make with regard to all types of contracts and it is unfortunate. It is true, that being a commodity supply contract, the exit clause on a commercial gas supply contract can't be too lenient; otherwise one party could withdraw at any point to the detriment of the other party. What is for sure, though, is that there should at least be some sort of a reasonable exit clause in the contract for supply of business gas.

by: Gen Wright

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