Terms and conditions of business – do you need them?
Many businesses start life, and indeed continue to trade, without terms and conditions of business in place. The main reason is often that there have not been any problems so far and therefore it is assumed that things will just keep ticking over. This is fine until there is a costly dispute, which often prompts a business decision to pay for a set of terms and conditions to be drafted, to avoid similar problems in the future.
Some of the main terms that should be covered by terms of business, whether you are a sole trader carrying on a gardening business, or a limited company providing complex building services and whether you provide goods or services or both, are:-
- A detailed description of the goods and/or services;
- The agreed price and any deposit (returnable or not);
- Payment terms and what happens if payment is not made;
- When the goods will be delivered, and/or the services provided;
- The expected quality of the goods or services, and the process for deciding whether any goods/services are defective;
- Limitation of liability;
- Force majeure; and
- The circumstances in which the agreement may be terminated and what will happen upon termination.
Whilst some of the terms may seem obvious, and things that can be dealt with by a conversation or an exchange of e-mails, written terms and conditions provide the clarity that may be otherwise lacking when a dispute arises.
For example, a tailor receives a telephone order for a number of made to measure suits for a wedding. The tailor begins work on the suits and later that week receives a phone call informing him that the wedding is off and the suits are no longer required. Alternatively, the order could be amended as a number of the measurements given were wrong. Without terms and conditions of business it may not be entirely clear what level of payment is due and if the agreement can be terminated/amended in such a way.
This could necessitate a claim for payment, which will not be desirable if the tailor wishes to maintain a good relationship with the customer, or the tailor suffering a loss if the suits cannot be sold. If the tailor had terms and conditions of business in place, he/she could have stipulated whether a deposit is due, in which circumstances the agreement could be terminated/altered, and the amount of payment due if an order is cancelled/altered.
There are many circumstances in which you can quickly become involved in a costly dispute, with both parties suffering losses and believing they are in the right, if there are no terms of business setting out the contractual terms between them.
Terms and conditions are a safety net for your business, which, if properly drafted, should provide a solution to most problems which could arise, without the need for costly litigation. Furthermore, it shows you are professional and will give your business the right image.
Article written by Luke Hewitt - Trainee Solicitor