Why your business needs good terms and conditions

Commercial Article

20 January, 2017

We often find that entrepreneurs are so busy setting up or running their businesses that they have little time to think about the legal aspect of their business.

Does your business have a set of terms and conditions in place, and if so, when was the last time these were reviewed?

The Essentials

Terms and conditions are the basis of a binding contract between you and your customers. They are vital to your business and should be the first legal document that you put in place when you are starting a business. Once drafted, you can use these again and again, safe in the knowledge that your business is properly protected.

Here are some of the reasons why terms and conditions are essential for any business:

1. Good customer service

You can reduce the chance of having disgruntled customers by ensuring they understand their rights and responsibilities, and by applying the terms consistently to all customers.

Businesses who strive for good customer service can also set out customer rights. This provides customers with reassurance; it reminds them of your obligations and how you will deal with complaints and refunds (amongst other things).

2. Protection & Certainty

Whilst oral contracts are in theory just as valid as written contracts, it is more likely for a dispute to arise on what was actually agreed where the agreement is not in writing. By putting in place a set of written terms, there is greater certainty on the agreed terms and it reduces the scope for the parties to go back on their word and dispute what was agreed.

3. Enforcing your agreement/rights

A clear, comprehensive and robust set of terms, make it clear for parties to understand where a customer has breached the contract. Written contracts are easier to enforce if you need to instigate legal proceedings, for example for non-payment. It should not come as a surprise to the customer if you seek to enforce a right specified in the written terms.

4. Helping with Cash Flow

Establishing clear payment terms is important if a business wishes to improve its cash flow. Firstly, it ensures that the customer knows when they must pay. Secondly, if the customer fails to pay on time, by specifying so in your terms, you will have the right to charge interest for late payment. Finally, as alluded to above, these terms will help the business enforce the agreement and therefore recover the debt.

5. Limiting Liability and other important matters

Business owners regularly think about the more business-related terms such as price, payment terms and delivery costs. A commercial contracts solicitor, on the other hand, can help you think about other important legal matters such as limiting your liability, protection of your intellectual property rights, the passing of title and risk, and protecting you against events outside of your control. A well drafted set of terms and conditions will fully protect your position.

6. Comply with law

A commercial contracts solicitor can help ensure that the terms make reference to any specific regulations which apply to your particular industry. For example, there is a requirement on businesses carrying out e-commerce to provide certain information to its customers in writing prior to the conclusion of the contract. This information is usually set out in the terms and conditions.

A review of other legal requirements may also lead the business into drafting additional policies, such as a privacy policy designed to allow businesses to comply with legal obligations surrounding data protection.

One Size Does Not Fit All

It is important to make sure that your terms have been specifically written for your business. It may appear on the face of it that a competitor business is set up and run in a very similar way as yours and therefore a good template to 'borrow'. However, aside from this being a breach of copyright, the way each business is run is unique and you run the risk of missing something out or unwittingly placing obligations on your business which you are unaware of. Just because another firm is using those terms does not mean that they have obtained professional advice either.

Do your Terms need updating?

Here are some practical tips for you to think about when reviewing your terms:

What are the key commercial terms you are offering your customers?
What could possibly go wrong (think about the most awkward customer possible)?
What are the different distribution channels used by the business and are the terms appropriate in all circumstances?
What has changed in the business since your terms were drafted?

Summary

If this has got you thinking, the next step is to speak with a business contract solicitor to ensure everything is covered. By tailoring your terms, you can minimise risks to your business.

Our commercial solicitors ensure contracts are well drafted, that you understand the contracts and that you know how to use and implement them. Please do not hesitate to contact either Ismaeel Waseem or John Pickervance">John Pickervance by email or on 0800 689 0831.

Learn more about our Commercial department here

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