Getting what you wish for
Most businesses put together a wish list for the New Year. My bet is that many of them include growth and increased margins on that list and rightly scope out business development plans to achieve this. Here are a couple of extra points for your plan that my experience as a litigator shows are all too often overlooked but which will help ensure that the fruits of the BD get to your bottom line.
Vanessa Crawley’s piece explains why you need your own terms but there’s no point in having a shiny new set of standard terms if your sales team doesn’t know what they say or how to ensure they apply to the deals they do.
Know and understand what’s in your terms
Salespeople aren’t typically interested in the small print but it exists for a reason – to protect you – and as you might expect any statements they make that run contrary to it are only going to undermine your position if wrinkles appear in the relationship with your customer. Promises or misunderstandings about performance and delivery times are common problem areas. It’s vital that those on the front line know what your fall back contractual positions are on these so they don’t say or do anything that’s inconsistent with it. For example, promising a fixed number of widgets that will definitely weigh X by a set date when your terms provide you with leeway on quantities, tolerances and dates. Promises that go against these may well give rise to allegations of and claims for misrepresentation and the ensuing lost management time that can easily be avoided.
Buyers have a vested interest in understanding terms too so they know what the score is in relation to ‘nasties’ like limitations and exclusions of liability that they may fall foul of later and wish they’d known about upfront.
Varying your standard terms is always possible if agreement can be reached, but again make sure that whoever’s responsible for agreeing the variation understands what any variation clause in those terms requires for a variation to be enforceable. At the very least expect something in writing but it may well have to be signed by a director of both parties. If a seller’s insisting on this a buyer shouldn’t have any qualms about going above a salesperson to make sure everyone gets what they’re bargaining for.
Getting your terms in
Incorporation is the name of the game. If terms aren’t incorporated they can’t be relied on. There are various ways to incorporate terms but the safest way to do it is to make it very clear that you are contracting on the basis of your terms before the deal is concluded and provide your counterparty with a set.
Yes, you can make statements on purchase orders about terms applying and being available on request but this isn’t watertight and can lead to costly investigations and problems down the line. You can also put terms on the back of invoices too but the chances are this will be too late (because the invoice is issued after the contract was formed) – at best you might incorporate them after a few sales for later orders provided they’re all placed fairly close together, but at worst you’ll fail completely and lose the benefit of the clauses you may need to protect position.
The take away point is that when people do business they want certainty. Knowing where you stand contractually before you sign on the dotted line is a sure fire way to get this and should see buyers wooed by your BD getting what they expect and paying you as you want them to.
Our next Credit Control Forums will be looking at the whole area of terms of business and their use/abuse. Please email email@example.com to find out more.