Commercial Terms & Conditions: Checking the small print
What do businesses need to know about commercial terms and conditions?
As a business owner or manager, you want to protect yourself and your business when entering a new agreement with a third party.
Terms and conditions are therefore vital, but where do you start?
Here are some of the main points you need to know:
Standard Ts & Cs
If you are entering into a contract relating to the sale and purchase of goods and/or supplies, you could use standard terms and conditions. These may include the price, method of delivery¸ retention of title of goods, any exclusions of liability and warranties.
The advantages of using standard terms and conditions include reducing costs and expenses in completing transactions, standardising the terms used in the business and ensuring favourable terms are in place.
However, you may find it difficult to use them without the other party wanting to amend or substitute some of the standard terms with their own. You must also be careful that any Ts & Cs comply with statute and common law.
Flagging them up
You need to make the other party aware of your standard terms and conditions at the earliest opportunity and can’t impose them after a transaction has taken place. You wouldn’t be able to send them with the invoice after the service/goods have been used/bought.
Instead, you should include the terms and conditions – or at least a notification of their existence – on any quotes you give.
If your customer sends you a purchase order, you could send an acknowledgement which includes a reference to the terms and conditions. Where possible, get your customer to sign to say they accept the Ts & Cs before they enter into the contract.
Mine or yours?
In some circumstances, both parties may have their own standard terms and conditions.
In these instances, one of the parties may try to introduce their own new terms when accepting an offer and this is known as a ‘counter offer’, rather than an acceptance.
Usually, the last set of Ts & Cs shared before the contract is carried out would take effect.
Regular and fair
If you can prove there has been regular trading going on between you and the other party on consistent terms, then you might be able to establish these standard terms have been incorporated into the contract.
You should make sure your terms are fair.
The office of Fair Trading, along with other bodies, can take legal action to prevent the use of unfair terms. You should refer to the Unfair Terms in Consumer Contracts Regulations 1999 for guidance.
Exclusions and limitations
As a seller you might want to limit your liability by excluding any statements made in your marketing material and exclude any implied terms relating to quality.
However, your buyer may want warranties relating to quality and performance, as well as specific points in the Ts & Cs outlining what will happen if you fail to perform your obligations under the contract.
You should take care to exclude any written or oral statements made before the conclusion of the contract. In some instances, pre-contractual statements can be binding or come under the common law and/or the Misrepresentation Act 1967 for fraudulent, negligent or innocent misrepresentation. If this happens, it could lead to the possible rescission of the contract.
Keeping it legal
Standard terms & conditions may be subject to some level of statutory control.
There are regulations in place to protect both parties, especially where one of you has more bargaining power than the other.
For example, exclusion of certain terms may be prohibited under the Unfair Contract terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999.
There are a number of rules applying to all contract content, which have been developed by the courts to limit the scope of exclusion clauses contained in contracts.
Often, these common law rules are applied to ‘incorporation’ clauses – which refers to clauses that need to be included in a contract to be effective at excluding any liability – and ‘construction’ clauses – which relate to ‘contra proferentem’ which rules that any ambiguity within a clause will be interpreted against the party relying on it.
How we can help
Before dealing with a new customer or supplier, we would advise you to pay careful attention to the terms and conditions of any contract.
We can assist you in drafting bespoke terms and conditions to suit your particular type of business.
Please get in touch with our commercial team - ask for Paul Hughes on 0121 705 7571, or email firstname.lastname@example.org
This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.