Terms and Conditions - How important are they?

Businesses of all sizes often tell me: “We’re thinking of taking a general set of Terms and Conditions from an online source” or “We’ve adapted a set of terms from something we’ve been sent” or worst of all, “We don’t have Terms and Conditions and just work on trust”

My advice is: don’t do any of these. The importance of having a clear, expertly drafted and specific to your business set of Terms of Conditions, or T&Cs, can be priceless.

Set out below is why:
 
Standardising your terms and conditions
Businesses use standard T&Cs for many reasons such as consistency between clients or customers, for speed and to deal with liability.

Many businesses use standard T&Cs without appreciating their importance. Frequently, businesses do not enter into written agreements or may take agreements verbatim from elsewhere. It is essential you’re your business understands the need to enter into written agreements where possible and to adopt written terms that are pertinent to that business or the trade operated within.

Importance of terms and conditions
Standard T&Cs, if used correctly and duly incorporated, are fundamental to income generation or revenue. They should form the basis of all contracts and provide a framework for day to day operations as well as protection in contractual matters. However, there can be a tendency to often overlook their standard terms and focus on generating revenue without a core set of terms providing a framework around that revenue.

A factor in any matter of commerce and when things can go wrong is when Individuals within a business find themselves using standard terms because they are there and do not necessarily understand their meaning or impact, or question their relevance or importance to the transaction or the market.

Disputes can arise because by the time the standard terms are considered, that dispute has probably occurred and the contract will already have been formed on the terms set out in the standard terms. At this stage it is often too late to challenge the standard terms.

Speed and responsiveness is a key part of business life nowadays. On occasions the need to secure revenue quickly may lead to reduced, or no legal involvement in the contracting process. This can lead to the following issues:

  • standard terms not being properly incorporated;
  • terms used being outdated;
  • terms used being inappropriate for the key needs of the business; or
  • disadvantageous unenforceable contracts being entered into due to the sales team not following procedures. For example, 'yes, of course you can have the biggest discount ever – its our quarter end!'.

The above issues may expose businesses to the following risks:

  • being subject to the other party's T&Cs, which may be more onerous;
  • unenforceable provisions being contained in the standard terms; or
  • unnecessarily binding the business to terms that are not appropriate to the transaction or deal.

By considering the advantages of standard T&Cs, we can work with you to minimise the risk of problems arising and appropriately manage your potential exposure to a liability.

The advantages of using standard terms and conditions
The advantages of using standard T&Cs are that they:

  • save time and money in bespoke negotiations – set out at the outset whose terms shall apply;
  • provide a framework for transactions – a service level agreement (SLA) or set of agreed parameters, will often focus the products or services being delivered and received;
  • provide consistency between all business transactions – this enhances productivity internally and allows you and your employees to focus on your core business with the knowledge that consistent terms are in place;
  • provide the opportunity for you to impose your terms on the other – this will, if able to, enhance your contractual position on the transaction to have matters go as you want them to;
  • improve efficiency (with standard terms and procedures and with training, more junior employees can conclude transactions on behalf of the business and allow management time to be freed up); and
  • manage the allocation of risk and responsibility for risk management, compliance and insurance.

With the above in mind, it is always my advice to have clear, precise and consistent terms underpinning any business transaction. If you have terms and conditions in place, it is always worth reviewing these from time to time to ensure they are current, legally complaint within your industry and fit the purpose for which they were designed.

To enquire further as to whether your existing terms are relevant, in need of updating or whether new terms should be written, please do not hesitate to contact Thomas Hunt by clicking on his details at the top of the page.