Why your business needs good terms and conditions
Entrepreneurs are often so busy setting up and running their businesses that they have little time to think about the legal aspect of it.By Ismaeel Waseem, solicitor in the Corporate & Restructuring team at Forbes Solicitors.
Does your business have a set of terms and conditions in place, and if so, when was the last time these were reviewed?
The EssentialsTerms and conditions are the basis of a binding contract between you and your customers. They are vital to your business and should be the first legal document that you put in place when you are starting a business. Once drafted, you can use these again and again, safe in the knowledge that your business is properly protected.Why terms and conditions are essential for any business:
1. Good customer serviceYou can reduce the chance of having disgruntled customers by ensuring they understand their rights and responsibilities, and by applying the terms consistently to all customers.
Businesses who strive for good customer service can also set out customer rights. This provides customers with reassurance; it reminds them of your obligations and how you will deal with complaints and refunds (amongst other things).
2. Protection and certaintyWhilst oral contracts are in theory just as valid as written contracts, it is more likely for a dispute to arise on what was actually agreed where the agreement is not in writing. By putting in place a set of written terms, there is greater certainty on the agreed terms and it reduces the scope for the parties to go back on their word and dispute what was agreed.
3. Enforcing your agreement/rightsA clear, comprehensive and robust set of terms, make it clear for parties to understand where a customer has breached the contract. Written contracts are easier to enforce if you need to instigate legal proceedings, for example for non-payment. It should not come as a surprise to the customer if you seek to enforce a right specified in the written terms.
4. Helping with cash flowEstablishing clear payment terms is important if a business wishes to improve its cash flow. Firstly, it ensures that the customer knows when they must pay. Secondly, if the customer fails to pay on time, by specifying so in your terms, you will have the right to charge interest for late payment. These terms will help the business enforce the agreement and therefore recover the debt.
5. Limiting liability and other important mattersBusiness owners regularly think about the more business-related terms such as price, payment terms and delivery costs. A commercial contracts solicitor, on the other hand, can help you think about other important legal matters such as limiting your liability, protection of your intellectual property rights, the passing of title and risk, and protecting you against events outside of your control. A well drafted set of terms and conditions will fully protect your position.
Do your terms need updating?Here are some practical tips for you to think about when reviewing your terms:
- What are the key commercial terms you are offering your customers?
- What could possibly go wrong (think about the most awkward customer possible)?
- What are the different distribution channels used by the business and are the terms appropriate in all circumstances?
- What has changed in the business since your terms were drafted?