Run | 5 December 2017

Checklist: Terms and Conditions of your business

Reading Time: 5 minutes

Your Terms and Conditions for your Business (“Business Terms”) set out the way in which your relationship with your customer will operate. You will need to consider carefully how your business operates, and how it may operate in future, when drafting your Business Terms. It is a document which should be reviewed regularly as your business grows or changes.

The key provisions in your Business Terms will be dictated by commercial decisions (e.g. your company’s sales process, variations to the scope of work, delivery, warranties and payment options). All levels of employees should have some input into the drafting and updating of your Business Terms as they will be the key to its daily success. Once adopted, your all employees (particularly your sales team) must be made aware of how important it is for your Business Terms to be used and for them to follow standard procedures. It is difficult to enforce elements of your Business Terms with customers if the business itself is not strictly adhering to its own terms. Give guidance to your staff on how to complete any blank spaces which need to be completed in relation to each order. Whenever you introduce new or amended Business Terms, send a copy to every customer telling them that the new Business Terms will apply to your relationship with them going forward.

Business Terms are not to be confused with “Website Terms of Use”, which set out the terms on which a user accesses your website or app. If you’d like to know more, please see our Article I have a website. Do I need Website Terms of Use? for more information on Website Terms of Use.

If your business is entirely an e-commerce one and your goods are only sold online through a website or an app, please also see our Article Checklist: Online Terms of Business for more information on the issues to consider when selling goods online.

There are a number of items you should consider when preparing your Terms of Business. You will also need to confirm they comply with any applicable consumer laws and regulations in the country you sell or operate in.

Description and Specification:

•  Identify the goods or services clearly and accurately. Disputes around what the customer thought they were getting versus what the business provided to the customer are common but easily avoided.
•  What happens if the customer requests a variation in the goods or services? Will this variation be treated as being out of scope and subject to additional charges?
•  Is a general description of the product or service sufficient or do you need to agree a detailed specification of the product or scope of services? If a specification is needed, and the customer prepares it, the customer should be responsible for its accuracy and completeness.

Quantity:

•  State the quantity of goods to be sold (often covered in the description of the goods).
•  Is it difficult to count or weigh the goods precisely?

Quality:

•  What are your policies on refunds, replacement, repair or re-working damaged or defective products?
•  How will you refund or rectify a service which has not been accepted by a customer?
•  What warranties will you offer on the goods? Will there be a defects liability period/ warranty period in respect of the goods or services?

Acceptance:

•  When does the customer notify you that they accept the goods or the services?
•  Will there be a process/testing regime prior to formal acceptance of the goods or services? If so, this should be set out in detail.
•  If the customer wants to reject the goods, when do they need to notify you by? How will they do this? Ideally, the grounds for the rejection of goods should be limited and should be expressly set out in the Business Terms.

Delivery of Goods:

•  Will you deliver the goods to the customer? Or will the customer collect the goods?
•  How long will it take to deliver the goods to the customer? Is delivery within your control? While you may wish to provide an indication of likely timing, you should not make any guarantees.
•  Who will pay for the delivery costs?
•  When is delivery deemed to be completed?
•  What happens if your delivery is late? If your goods are perishable, can the customer reject them if the delivery is late? Or will you offer a discount?
•  What if the goods get damaged in transit? Under consumer protection laws, you may be responsible for delivery even if you arrange for a courier company to deliver the goods for you.
•  Do your Business Terms tie in with your courier’s standard terms?
•  What happens if the delivery of goods is delayed by the customer?
•  Do you need a right of access to your customer’s site or premises to deliver the goods?

Performance of the Services:

•  What is the timeframe or programme for the performance of the services? This should preferably be an estimate rather than a fixed timeframe.
•  What happens if the performance of the services is delayed by the customer?
•  Do you need to break your services down into measurable milestones?
•  Should payments be linked to the performance of measurable milestones?
•  Do you need a right of access to your customer’s site or premises to perform the services?

Price:

•  What is included in the price: packaging, delivery, insurance, assembly, VAT?
•  Do you need flexibility to increase the price after you conclude the contract with your customer e.g. if your own supplier increases its charges and your margin is eroded?
•  Will you agree upfront the cost of additional products and services if the customer asks for them?

Payment:

•  When does the customer pay? On the invoice date, on delivery, another date?
•  Will you charge a late payment fee or interest if the customer does not pay on time?
•  Will you offer a discount if the customer makes an early payment?
•  How will the customer pay you: cash, credit card, cheque, cryptocurrency?
•  Can the customer pay in instalments?
•  What happens in the event of a disputed invoice? Is the customer entitled to withhold disputed amounts?

Limiting or excluding your liability:

•  Will you include an overall cap on your liability e.g. a cap which is linked to the value of the goods or the fees payable in respect of the services being provided?
•  What liability will be limited or excluded? For example, in some jurisdictions it is not possible to exclude liability for personal harm or injury.
•  Do you have adequate insurance for any liabilities under the Business Terms?

Other points to consider:

•  When will legal title and risk in the goods pass to the customer and have you protected your position if there is a problem e.g. the customer does not pay in full for the goods?
•  What standard terms do you need to exclude or limit your liability? e.g. force majeure, waiver, entire agreement, customer tampering with the product, choice of governing law and jurisdiction.
•  What terms do your competitors use? You can’t copy them but consider whether you want to take a consistent approach.
•  Is this a one-off arrangement or are you establishing a long-term supply agreement?
•  Are there any particularly important provisions that should be highlighted to the customer e.g. by stating them in a covering letter or proposal?
•  Have you taken steps to protect your intellectual property? If you’d like to know more, [PROTECT my business] for more information on intellectual property.

 Updating your Business Terms:

After you have developed your Business Terms, they should be reviewed on a regular basis to ensure they continue to meet the needs of, and the way in which you conduct, your business and any applicable legal requirements.

•  Has there been any changes to the law which need to be reflected in your Business Terms?
•  Have you had any disputes with customers that have shown weak spots in your Business Terms that need improving?
•  How has your business changed since you last reviewed your Business Terms? Are the goods and services being sold still the same? Has the profile of your customers changed? Are you selling the goods into different geographic markets?
•  What terms are your competitors using? Have they made any changes to their terms which might indicate you also need to change your Business Terms to remain competitive?