Do you have written terms and conditions in place?
Many businesses still trade on a ‘gentleman’s handshake’ and do not formalise contracts in writing. Whilst this approach may work for many businesses, the danger is that disputes can arise when things go wrong and the parties will not have written terms to refer to or protect them. A party’s liability to the other may therefore be exposed.
You should not wait until it’s too late before putting in place terms and conditions. Disputes are time consuming, distract your attention away from the business and can be costly to resolve. Written terms and conditions aim to regulate your trading activity, protect your commercial interests and add clarity so that you and the other party are on the same page and aware of your obligations to each other.
Are your terms and conditions incorporated?
There is little point of having terms and conditions if you do not have the appropriate procedures in place to ensure that they apply to the contract. To incorporate your terms and conditions, it is important that you put forward your terms and conditions to the other party before the contract is formed, and establish the other party’s acceptance of them. You may do this by attaching your terms and conditions to any pre-contractual correspondence or documentation (e.g. quotations, order forms) and expressly state that your terms and conditions will apply to the contract.
This may prompt the other party to put forward its own terms and conditions. It can then become unclear whose terms apply if you go back and forth negotiating the terms. You should ensure that you are always the last to send or refer to your terms and conditions before the contract is formed in order to overcome the ‘legal battle of the forms’. This is because the terms that are last delivered are the terms that will usually apply to the contract.
You should therefore be cautious when corresponding with the other party as you do not want to trade on their terms.
Are you contracting with consumers?
If you trade with consumers, your terms and conditions will need to comply with consumer laws. The Consumer Rights Act 2015 provides consumers with rights in respect of faulty goods, digital content and services, and can entitle them to have the goods/services repaired, replaced, repeated or the price refunded.
The Consumer Contracts Regulations 2013 may also provide consumers with additional rights. This legislation applies in respect of consumer contracts made ‘off premises’ or ‘at a distance’, (i.e. by email or telephone or away from your business premises) and places further obligations on traders. In particular, these Regulations give consumers the right to cancel the contract within 14 days from the date the contract was made, without giving any reason or incurring any costs – also known as the ‘cooling off period’. If the contract is actually concluded at your business premises, the consumer will not have this right.
Terms and conditions supplied to consumers must be fair for it to be enforceable. For example, you are unlikely to get away with enforcing hidden onerous terms or extra charges that apply after the contract is formed.
Are your interests protected?
Do your terms and conditions adequately protect your interests? This will all depend on the nature of your business, your needs/requirements and any particular issues or risks that could arise. If you are a ‘supplier’ your interests will differ to that of a ‘customer’ but it is important that your terms and conditions get the balance right to encourage long-lasting business relationships.
At the very least, you should have adequate insurance in place to protect yourself in the event that you are found liable and required to pay out to the other party. It is also advisable to include limitation of liability clauses in your terms and conditions as the absence of such may mean that your liability to the other party will be uncapped/unlimited. Having said this, caution should always be taken when deciding the amount of the cap. This is because caps or limits of liability in commercial agreements are subject to a reasonableness test under law. If a court find that the amount you seek to limit your liability to is unreasonable, the clause will be void and unenforceable. Also, you have less flexibility in limiting your liability to consumers as it is more likely that such limits will be deemed as unfair and thus unenforceable.