One way of protecting your business is to review your standard terms and conditions regularly to ensure they are up to date with the most recent legislation. For most businesses having up-to-date terms and conditions might not be their number one priority and may only be taken into account when a dispute arises, by which time it could be too late.
Your standard terms and conditions – do they do the job?
To adequately protect your business, there are many key points that should be covered by your terms and conditions, including:
- Retention of title – When does the title in your goods transfer to your customer? Ideally, the title will transfer only when the goods have been paid in full and cleared funds.
- Interest – Do your terms provide for interest to be charged on overdue payments, in accordance with the Late Payment of Commercial Debt (Interest) Act 1998 or do you specify a rate?
- Debt collection costs – Do your terms and conditions enable you to pass your costs incurred in recovering a debt to your customer?
- Suspension of deliveries/performance – Do you have the ability to suspend further deliveries of goods or the provision of services in the event that your invoices have not been paid?
- Intellectual property – Who owns the intellectual property? Ideally, you will, but this may not always be the case.
- Limitation of liability – Has your liability been limited or is your business at risk of an uncapped liability claim? An uncapped liability claim can be extremely damaging to a business.
- Disputes – Is there an agreed process for settling disputes between you and the customer? This could include court action, arbitration or a prescribed form of alternative dispute resolution (also known as ADR).
Battle of the forms
Did you know that standard terms will only be effective if they have been properly incorporated into the contract?
Simply printing the terms on the reverse of your purchase order forms, order acknowledgements, invoices and other literature will not always be sufficient to make them apply, especially if the order has already been completed, nor will telling your customers that they apply without providing them with a copy.
When you and your customer both try to contract on your own terms, the battle as to whose terms will apply to the contract begins. Generally, the last set of terms passing between you and your customer before the contract is performed will triumph in the battle of the forms and applications.
Your standard terms and conditions – next steps
- Review your standard terms and conditions regularly to ensure they are up to date with the most recent legislation.
- Train and instruct staff on the terms and company procedures.
- Set out your standard terms and conditions in all pre-contractual documentation.
- Make sure your standard terms and conditions are on the last document passed between you and your customer before delivery.
How can Nelsons help?
If you require any advice in relation to standard terms and conditions, please contact a member of our expert Commerce & Technology team in Derby, Leicester and Nottingham on 0800 024 1976 or via our online enquiry form.