Every business needs a robust set of written contract terms and conditions for its clients. Once accepted or acknowledged by a client, they are the terms on which you trade with them; a legally binding contract providing essential protection for your business. Elizabeth Owen, one of Business Clan’s specialist Business Advisers, explains why they are so important and how to get them right.
What are contract Terms and Conditions?
Whether they are ‘click to accept’ terms on your website or printed on the back of an order form, once your business’s terms and conditions have been accepted or acknowledged by a client, they establish a legally binding relationship between you, providing your client with clarity about what to expect when they buy a product or service from you. They explain:
- exactly what product or service you’re providing;
- whether you provide a product or service with specific guarantees or warranties (in addition to any that may be implied by law);
- what your payment terms are;
- important details that are specific to your business and the product or service you provide.
Does my business really need written Terms and Conditions?
Written Terms and Conditions (or T&Cs) are essential for any business because they will:
Help to create certainty and minimise the risk of legal disputes
Written agreements are a lot clearer than oral agreements and it’s much easier to prove that they exist. With clear T&Cs in place, any dispute between you and your client regarding the exact nature of your original agreement will be easier, quicker and cheaper to resolve.
Ensure all the important details that are relevant to your business are covered, not just the obvious ones. A comprehensive agreement will not only cover business related issues such as price and payment terms but will also, for example, protect your intellectual property rights, cap your liability (appropriate to the risks involved and decided with reference to your business’s insurance coverage), disclaim or limit your liability for failure or delay caused by force majeure* and include data protection provisions if the transaction involves the transfer or processing of personal data.
* A legal term which means unforeseeable circumstances that prevent someone from fulfilling a contract.
Ensure you can enforce your agreement
Clear terms and conditions are much easier to enforce if there is a breach of contract – for example, if you need to take a client to court for non-payment.
Help you to provide good customer service
Clearly defined procedures explaining how your business handles, for example, complaints and cancellations, will provide essential reassurance for your clients as well as protection for you in the event of a dispute.
Help to avoid mismatched expectations
Mismatched expectations are not good for your business. If, for example, you sell products from a variety of suppliers, your client may expect delivery within two days, whereas in reality it may take two weeks for the delivery of goods from overseas. Writing this in your T&Cs will help you to keep your clients happy and query-free as well as generally enhancing the reputation of your business.
Help you comply with the law
It is important to refer to any specific regulations that apply to your particular industry in your written terms. For example, businesses operating in the services industry are required to inform clients of certain information and how complaints are handled. The appropriate place for this is in your terms and conditions.
Note: T&Cs are not required by law and there a few types of small businesses that may not need them. Examples include small independent high street retailers such as greengrocers and corner shops, with few (if any) branches and no website. If you think your business falls into this category, we strongly recommend that you contact us to check before you make a final decision.
What should my Terms and Conditions say?
Who the contract is with
All parties to the contract need to know exactly who they will be dealing with if something goes wrong: remember individuals and consumers have different protections under the law than larger businesses so your T&Cs should reflect that. Make sure they are written in user-friendly language that your clients will easily be able to understand.
What the contract is for
Your T&Cs should set out a clear definition of what products or services will be provided. The law sets out certain standards in terms of quality and refunds, but you can use your T&Cs to promote any extra benefits you may want to offer your clients. For example, an extended cooling off period, a money-back guarantee or a more generous exchange policy than your competitors.
Terms of payment
It’s crucial to get this one right! You must be very clear about when you expect your clients to pay you (in advance, on delivery, or within 30 days for example) and what will happen if payment is late. Will you charge interest? What steps will you take to recover your debts?
When the contract will be legally binding (offer and acceptance)
To form a contract, there must be an offer made by one party which is, in turn, accepted by another party. It is important to set out in your T&Cs the precise moment that the contract becomes legally binding*.
* A contract is a legally binding promise (written or oral) by one party to fulfil an obligation to another party in return for consideration. A basic binding contract must comprise four key elements: offer, acceptance, consideration and intent to create legal relations.
What will happen if something goes wrong
You hope that things won’t go wrong, but if they do then your well-crafted Terms and Conditions will help to protect you. How you choose to draft these specific clauses in your T&Cs will depend on whether you are selling a tangible product where it may be clear that it’s faulty or broken, or a service such as training or consultancy. Some examples of the types of clauses to include are:
Liability clauses can, for example, limit the damages that you may have to pay to your client if your goods or services fail, and the level of exposure your business will face in the event of a claim brought against you.
These clauses will set out how long the contract will last and what happens if it is cancelled. They may also need to cover under what circumstances your clients can get their money back (if they have paid upfront), or how much you will get paid if a service is cancelled before it’s finished.
c. Dispute resolution
It’s sensible to set out in advance a clear process to follow to resolve any problems that may arise between you and your clients.
d. Choice of law and jurisdiction
In the digital age even small businesses are global, so whether your business is based in Kingston-upon-Thames or Kingston, Jamaica, you will need to decide which country’s courts can hear any disputes in relation to your contract.
Other important details relevant to your business
You may have intellectual property you wish to protect or you may need to provide important information about how you will deal with any personal information you receive from a client (as required by the new data protection legislation which came into force in the UK in 2018). Every business is different so it is important to draft your T&Cs taking into account the specifics of your business.
Elizabeth’s Top Tip:
“Best practice dictates that when you require T&Cs they are made available to each and every client, and that they are acknowledged by your client prior to a contract coming into force. That way, they will always be enforceable.”
Terms and Conditions: how Business Clan can help you
A comprehensive and clearly written set of T&Cs is a fundamental building block for your business, so it’s essential that you get them right from the outset and remember to review them regularly as your business develops and as laws relating to your business change. Whether you are running a physical business, an e-commerce website or a combination of both, Business Clan’s Commercial Team are on hand to help:
- draft new T&Cs, specifically tailored to your business requirements;
- review your company’s current T&Cs.
Please note that this article is for information purposes only and does not constitute legal advice. If you would like further information or to talk to one of our business advisers about drawing up a contract, please contact us.