23 Sep Terms & Conditions: Why legal small print is a big deal
Terms and conditions: why legal small print is a big deal
Many of us are guilty of barely glancing over the small print before purchasing a product or putting our signature on agreements. But whether or not someone reads them, those terms and conditions (Ts&Cs) are there for a reason. As a business owner, the same complacency towards them shouldn’t apply.
No matter the size of your business, establishing clear terms and conditions should be top of your to-do list before engaging in the exchange of any goods or services. Yet we’ve seen too many businesses learn the hard way that some well-constructed terms and conditions could have been all it took to protect their business from significant loss.
So, why is it so important to sort your Ts&Cs?
While Ts&Cs act as a mutual agreement between you and your customer, the main reason they are important is really to protect you as a business. Ts&Cs set out the responsibilities of both parties, outline risk and liability, and also protect any assets that the company has.
Those may be tangible assets, such as goods for sale, or equipment used or leased in order to carry out certain services (for example, scaffolding equipment). Or it may also be intangible assets – things like intellectual property, for example if you are providing consultancy services.
In the same way that you promise to provide something to your customer, whether that’s a service or a good, the customer has their side to uphold too. Ts&Cs help spell out the consequences of either party not following through with their part of the deal.
Most commonly, your clients’ responsibilities will largely be around payment terms. Ts&Cs allow you to outline the process your business undertakes should it not receive payment, and who is responsible for the cost of recovering that debt should they fail to pay.
Terms and conditions also help ensure you are limiting your liability. Under common and statutory law, your liability can be unlimited. Say, for example, you are a builder and you accidentally damage a property you’re working on. You may not only be required to pay to fix that damage, but your business could also be liable for any flow-on issues that arise later. Unless, of course, you have some tight Ts&Cs. They should set out the limits on what any liability will be and ensure responsibility is clearly understood by both parties.
Overall, you need to consider any risks that your company could be exposed to. That could be things like:
- If the work you do is weather dependent
- If there are specific health and safety risks involved in the work undertaken
- What is expected from your client in order for you to fulfil your service on time and to budget
- Any legal or compliance obligations involved in the transaction
- Privacy expectations and use of data
- Termination policies
- Warranties or performance guarantees
Crafting your Ts&Cs
Because Ts&Cs are all about protecting your business, there isn’t a one-size-fits-all solution to crafting rock-solid agreements. What matters most, and what assets you need to consider, will vary from company to company. Ts&Cs need to be in writing, and are more enforceable than a verbal agreement.
It’s important to also remember that the law is constantly changing, so your Ts&Cs are not something you can just set-and-forget. That means the best thing you can do is engage a professional to draft your Ts&Cs. A good lawyer will be staying up-to-date with the latest case law and will be able to proactively advise you when changes are needed to ensure your business is always as best protected as it possibly can be.
Often businesses will want to save on costs and will come across a template online or through relevant industry organisations. If it’s come from a trusted source, these templates often provide a great framework to work with, but it’s still worth having a professional check over them before finalising, just to ensure you’ve crossed all your t’s and dotted your i’s that are relevant to your business.
Project specific conditions
Many businesses will find that certain projects come with particular requirements, customised quotes or additional risk. In these instances, it’s best to include specific terms within your quote. While you will still supply your standard Ts&Cs, if there are any inconsistencies, the terms specified in your quote for the project will take priority.
It could also be that a business or client you partner with has their own Ts&Cs and they may want you to work in line with those rather that your standard Ts&Cs. Read these thoroughly to closely assess any risk to your business and ensure you’re still well-protected. If needed, consult your lawyer before signing anything on the dotted line.
For larger or riskier transactions, a business may request a personal guarantee from someone such as the Director(s) of your company – this means putting personal assets on the line as additional security for the agreement in the event that a debtor is unable to fulfil its obligations under the contract. It makes a guarantor personally liable for amounts owed. Some common examples are when a company enters a lease agreement, applies for funding or enters a franchise agreement. You do need to be careful about how you go about getting a personal guarantee in order for it to be enforceable, so professional legal advice is recommended. This is also another good reason to read agreements with other suppliers carefully, as it’s possible to sneak a personal liability clause into your agreement. You don’t want to unwittingly put your own personal assets, or those of other Directors, on the line.
Doing business in a digital world
It’s not uncommon for transactions to happen online, but is it enough to simply have your Ts&Cs on your website? The short answer: no. Whatever process you use to finalise an agreement, you need to be able to record and prove acceptance of your agreement in some way. Where it’s not possible to obtain a signature, your website or digital platform needs to include a means for your customer to indicate that they have read and agreed to the terms of the contract. This can be as simple as a checkbox option or including wording that clearly advises that by progressing the transaction you are agreeing to the terms and conditions provided.
You should have a fairly robust workflow in your business that turns a leads into customers and quotes into jobs. Within that workflow you should have built in how and when you provide your Ts&Cs (probably at the quote stage) and then how those are accepted. Taking a methodical and logical process to this and using available CRM and job management tools will help ensure nothing falls through the cracks in terms of your business providing its Ts&Cs or your new customer accepting them.
The bottom line on Ts&Cs
Getting your Ts&Cs done right with the help of a professional is a small expense that could save you big bucks in the long run. The right advice will help ensure they are enforceable and have adequately protected the things that matter most to your business.
Wondering where to start? We can help with that. We have an experienced commercial lawyer on the 5th Green team of advisors who can help you ensure your business is protected from risk and well-positioned for successful partnerships.
Get in touch for a no-obligation chat.