Whether you’re setting up a business, undergoing a restructure or simply reviewing your business operations, the terms and conditions for the supply of goods and/or services (T&Cs) may not be at the top of your list. However, perhaps they should be. Even if you think your customers don’t read them – you are better protected if you have well drafted T&Cs in place!
T&Cs play a crucial role in outlining the parties’ rights and obligations under a contract for goods and/or services and can help to resolve any disputes.
Five reasons you won’t regret ignoring your T&Cs:
- T&Cs are fundamental to a purchaser and supplier relationship so you know what you’re getting/giving and on what terms you’re doing so;
- They cover all the necessary key terms (as to pricing, payment, delivery, title and risk);
- They act as a safety blanket if something does go wrong, and will include a clear process setting out how disputes should be dealt with, saving you time, effort and money;
- They are in writing and are more enforceable than an oral agreement; and
- Will be specifically tailored to your business.
What should you include? T&Cs can cover almost anything you think is required and generally include the following key clauses:
- Price and payment: How much you get paid for the goods/services and when you get the money is important. T&Cs should specifically deal with how the price will be calculated and the manner in which a customer should pay for the goods/services. Consider how this works within your internal accounting system. Is the timeframe for payment fair and reasonable and will you charge default interest if they are late paying?
- Risk and title: If you’re a supplier, you will want to make sure that ownership of the goods remains with you until you’re paid for them. This means, with properly registered security interests, you may be able to repossess the goods in the event of non-payment. Conversely, you do not want to be responsible for ensuring the protection of the goods once they are out of your control. Therefore it is important that risk is transferred to the buyer at delivery (or even when leaving your premises where appropriate).
- Performance guarantees: If you are the supplier, you may wish to request personal or parent company guarantees to ensure that the goods/services will be paid for (or that you will have other recourse available to you) in the event that the customer defaults on their obligations under the T&Cs.
- Liability and indemnity: How much are you actually at risk of losing if things go wrong? Your T&Cs should ensure that in the event of default or breach of an agreement by the customer, you will be adequately covered for loss or damage. Also ensure your liability to the customer is appropriately limited so that your exposure is proportionate to the benefit of the contract to you.
- Security interest: If you are supplying goods, you may want the right to register a security interest in respect of those goods. In this case, your T&Cs should set out that you may register a security interest on the Personal Properties and Securities Register pursuant to the Personal Properties and Securities Act 1999 by virtue of the fact that the T&Cs create a security interest in the goods.
- Warranties: What warranties do your T&Cs include and how do these stack up against the goods/services you are providing? A breach of a warranty is often difficult to absolve yourself from, so ensure that you can comfortably stand behind any warranties you give in respect of your goods/services. Note that if you are supplying goods/services for personal or domestic use, then there are a number of implied guarantees that will apply under the Consumer Guarantees Act 1993 (such as that they are fit for purpose and of acceptable quality, among others).
- General clauses: T&Cs will almost always include standard clauses such as how disputes will be dealt with, the law governing the T&Cs and how they will be amended. General clauses go a long way to ensuring that the T&Cs are clear, concise and that disputes are kept to a minimum.
What else should you consider when thinking about your T&Cs?
Yours or theirs? If both parties have their own T&Cs, it can be difficult to determine which apply. It is important not to make the mistake of accepting the other party’s T&Cs and then try and impose your own on them. Unfortunately, the law will rule that since you accepted theirs first, theirs prevail. If presented with T&Cs you are faced with two options, either (1) review them (or better yet, have your lawyer review them) to ensure the terms being offered are fair and reasonable and that you can comply or (2) expressly reject the T&Cs and make it clear that any supply of goods or performance of services will be subject to your T&Cs.
One size doesn’t fit all! Whilst it may seem far easier and cheaper to use T&Cs you’ve found floating around on the internet, this is never recommended and may also be a breach of copyright (which we won’t go into here). Despite being a relatively simple document, T&Cs will need to be tailored to your business. Just because specific T&Cs have worked for the fertilizer supplier down the road does not mean that they will work for a florist business – each set of T&Cs are unique to the relevant business that they are designed to protect.
Unfair contract terms. Current laws regarding unfair contract terms mean you can’t get away with putting anything in the fine print in circumstances where this may be unfair to consumers who have little or no ability to negotiate the terms. This law is also under consideration by Parliament and may change in the future. It is important that your T&Cs are drafted to protect legitimate business interests and are not unfairly detrimental to consumers if enforced.
If its sounding like your T&Cs are in need of some TLC, or your business is lacking T&Cs altogether, then it’s a great time to put them in place or have them reviewed. With a little time and money spent wisely now, you could save yourself a lot in the future!
If you need any assistance with T&Cs for your business, do not hesitate to get in touch with the Business Law team at Lane Neave.
Business Law Team
If you need any assistance with the sale or purchase of your business, do not hesitate to get in touch with the Business Law team at Lane Neave.
Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace, Peter Orpin, Ellen Sewell, Matt Tolan, Carlo Wan, Kristina Sutherland, Jacob Nutt, Whitney Moore, Alex Stone, Ben Cooper, Lisa Catto
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