What every business needs: terms and conditions

Susan Honeyands, Partner

Many businesses, no matter the size, tend to focus on sales, delivery, and growth, leaving the important paperwork to worry about later. However, if things go wrong and there are no clear, written terms and conditions in place (T&Cs), a simple issue can quickly turn into a costly dispute.

No matter what kind of business you run, whether you provide services or sell goods, your T&Cs are one of the most valuable documents your business can have. They set out the rules of the commercial relationships between you and your customers or clients by defining what has been agreed, how the relationship will operate and, most importantly, what happens if something goes wrong.

Why terms and conditions matter

As commercial lawyers, we see that many start up businesses start out trading on a handshake or a simple email exchange. This can create relationships built on trust, yet it can quickly turn sour without written T&Cs as:

• A business may struggle to enforce payment or charge interest on overdue invoices;
• There may be uncertainty if a customer or client goes silent, cancels, or delays an order;
• A business might find themselves liable for losses that they could have protected themselves against;
• Disputes can become complicated and much more expensive to resolve.

These possible risks can all be prevented by having well-drafted terms in place. T&Cs offer clarity, consistency and legal protection, making both your obligations, and your customers’ rights clear from the get-go.

What good terms and conditions should cover

T&Cs will be different for every business depending on their nature and objectives but some key terms to consider are:

• Payment and price of goods and services –  setting out how and when the business will be paid and what happens in event of late payment.
• Delivery and performance –  timelines for delivery, methods and responsibilities, delays, and risk of loss.
• Limitation of liability –  to protect your business from excessive financial exposure in case of damage or unforeseen losses.
• Intellectual Property –  clarifies your ownership of the IP which your business has created or uses in its day to day and protection of that IP.
• Termination and cancellation –  what happens if either party wants to end the commercial relationship.
• Dispute resolution – how any disagreements will be resolved, including whether the parties will engage in mediation before litigation.
• Force Majeure – what can happen in the case of an unforeseen event which was outside parties’ control, for example a natural disaster.

Tailoring terms to fit your business

It is important to note, however, that using a generic template found online, or copying another company’s T&Cs can cause more problems than it solves. No two businesses are the same and your T&Cs should reflect how you operate and trade,  as well as your specific products, services, and processes.

For example, a business that provides services to consumers will need a different set of terms to a business which sells physical goods to another business. Similarly, if your business only trades online to consumers, there are other considerations such as consumer protection and distance selling regulations.

We recommend initially investing in bespoke T&Cs tailored to your business to prevent an expensive issue later. Doing so also demonstrates to your clients and suppliers that your business operates transparently and professionally.

Next in the series

In our next article in our “What Every Business Needs” series, we will focus on confidentiality agreements (NDAs): when they should be used, what they should cover, and how they can be the first step in protecting your commercial relationships.

In the meantime, our Commercial team regularly help businesses draft their T&Cs. If you would like to discuss reviewing your current terms or the drafting of new ones, please get in touch with a member of the team.

Contributors: Darcy MacMillan, Solicitor; Imogen Unwin, Trainee Solicitor