Terms and Conditions for a Business
Why do you need Terms and Conditions?
All businesses will buy and/or sell something, whether it be goods, services or both. Doing so creates a legal relationship between the parties whether they realise it or not. As general contract law and statute (Sale of Goods legislation for example) may not apply, and if it does, probably will not cover every eventuality, then having a set of Terms and Conditions (T&Cs) is probably a good idea.
What is in them?
Let us run through the basics. T&Cs will deal with the following questions;
- Who are the parties? Does the contract relate to other people other than the buyer and seller?
- What is being bought and sold?
- When does the contract start? When the buyer places an order? When the Seller confirms the order? Does it have to be in writing?
- How is the price for the goods or services calculated and when does it have to be paid? Is this in a quotation or a price list?
- Are there any credit terms?
- What is the penalty of non-payment? Interest on the unpaid sum? A right to terminate?
- When and how have the good or services got to be delivered?
- When does ownership of those goods or services pass from the seller to the buyer? When delivered? When paid for?
- Who insures them up to the point of delivery?
- What remedies has the buyer got is the goods or services are not what was ordered or are delayed?
- What guarantees or warranties are being given as to the good and services provided?
- What limitations are there on the losses and damages that can be claimed by the buyer if things go wrong? The purchase price? The whole of the buyer’s losses?
- Is there a complaints procedure or an arbitration procedure to prevent court litigation?
- How is the contract terminated? And by whom and when?
- What are the consequences of termination?
- Who owns the intellectual property rights (copyright, design rights etc) in any documents provided by way of services to a customer?
How are they communicated?
In short, never on the back of an invoice. For T&Cs to be effective, the buyer must be aware of them before the contract has been entered into. That happens before an invoice is raised. It is best to integrate it into the sales process at the beginning.
Does one size fit all?
Usually not. Although T&Cs say roughly the same thing, each business is different, and therefore T&Cs are best if they are tailor-made. Using a set of T&Cs which do not fit into your businesses’ method of working is likely to ensure that you come unstuck at some point.
Going back to the first question, if you can answer all the points under the heading “what is in them” positively, then the answer is no. If not, remember that
- A sale is a gift until you get paid.
- If you have not limited your liability reasonably, you have unlimited liability if something goes badly wrong.
- If you have not reserved your ownership of goods and they are delivered to a customer, they may belong to the customer even if they are not paid for, and may certainly be lost to a liquidator if the customer becomes insolvent.
- A set of T&Cs is cheaper than litigation.