Entering into commercial transactions with customers requires clear terms and conditions to establish expectations, limit liability, and protect the business legally.
Well-drafted terms and conditions are crucial for businesses selling products or services to consumers. They set the contractual framework governing the company’s relationship with clients. Getting the terms and conditions right is key to avoiding disputes, managing risks, and complying with legal obligations.
This article outlines what needs to be included in proper terms and conditions and why they are an essential component of running a business. With clear, comprehensive terms in place, companies can confidently conduct business and safeguard their interests when working with customers.
What Are Terms and Conditions?
Terms and conditions are sometimes called business terms, terms of service, or terms of sale. The terms and conditions of a business set out the contractual agreement between the company and its customers or clients when goods or services are sold. They outline the rights and responsibilities of both parties in their commercial relationship.
Terms and conditions allow businesses to manage customer expectations, reduce disputes, and protect themselves legally. Company directors have a key role in ensuring that terms and conditions comply with legal standards and safeguard the company’s interests. Directors must understand their responsibilities to make sure the company’s contracts align with business objectives and mitigate risks.
For businesses with multiple stakeholders, having a comprehensive shareholder agreement is equally important.
Why Do You Need to Include a Set of Terms and Conditions?
There are several key reasons for a business to have a clear set of terms and conditions:
- Legal Protection: Well-drafted terms and conditions limit a company’s liability and provide remedies if problems arise. They make clear when and how contracts can be terminated. This protects the business from unnecessary legal risks.
- Manage Expectations: Terms and conditions let customers know exactly what they can expect regarding pricing, delivery, returns, etc. This avoids confusion or surprise that could lead to complaints.
- Consistency: Standard terms and conditions ensure all customers are treated equally and prevent inconsistencies in service. Employees have clear policies to follow.
- Compliance: Terms and conditions allow businesses to meet legal and regulatory requirements related to sales, data protection, consumer rights, and more. Businesses should also be aware of relevant employment law requirements to ensure compliance across all operations.
What Needs to Be Included in Terms and Conditions?
UK and Welsh law requires certain information in terms and conditions for legal validity and to meet obligations to consumers. Businesses should seek legal advice to ensure their terms comply. Key items to cover include:
The Basis or Subject Matter of the Contract
The T&Cs should be clear about what you are providing or selling. You could describe this or link to another document, such as a sales page or brochure. You might say something like, these terms and conditions relate to products sold on our website, or similar.
Include Price Information
Provide clear pricing for products/services, or explain how pricing is calculated as well as allow provisions for price increases in the future.
Note if prices include or exclude VAT and other taxes or duties and state under what conditions prices might change, as well as how you’ll let the customer/client know.
Address any special offers, discounts, or free gifts. A provision will be needed for periodic price increases, such as subscription payments.
Payment Terms
Explain when and how payment is to be made – methods, timelines, refunds, etc. Set out procedures if payment is late or declined.
Services Procedures
Only include procedures that won’t change in your terms and conditions. Don’t make vague promises about service being available 24/7 if you can’t do this.
Provision for While the Contract Is Running
If you provide services to clients, for example, business consulting services, specify what happens while the contract runs. You may wish to include provisions for reporting, staff used, etc.
What you include will depend on the nature of your business.
Termination Provisions
Explain what happens when a contract ends naturally – return of goods, final payments, etc. Include things like:
- Length of the contract
- What might trigger a termination
- Penalties for early termination
- How will losses be proved
State how continuing contracts can be renewed or not.
Liability Limitation
Limitation of liability limits the damage to the business if you can’t deliver goods or services. Situations to consider include:
- Defective products
- If services provided are inadequate
- Goods or services are not as advertised
You can cap liability at a certain amount, but limitations cannot be unreasonable.
Business Protection
Additions like a confidentiality clause and provisions for action by a third-party should be included to protect the business.
Intellectual Property
State that the business retains IP rights and prohibits customers from copying/modifying IP. This provision is very important if you provide online services. More conditions will be needed if your intellectual property is particularly valuable.
Indemnity
Require the customer to reimburse costs if their acts cause your business to lose money.
Data Protection
Specify how customer data will be used and shared to comply with data protection laws. Require customers to comply with data laws regarding data provided to the company. Online businesses can refer to privacy notices displayed on a website.
Dispute Resolution
Explain the dispute resolution process – negotiation, mediation, courts, and applicable law. Mediation is very often underutilised, but it can save businesses a lot of money and is well worth considering before defaulting to litigation.
For tailored advice, businesses should consider settlement agreement services.
Assignment of the Benefit of the Agreement
In this context, assignment means transfer. Include provisions for if the client is sold to someone else or you decide to sell your business.
This is particularly important during business sale agreements, where the transfer of contracts and obligations needs to be clearly defined to avoid future disputes.
Other Considerations
Do not resort to a boilerplate Terms and Conditions. Always draft your own – or have T&Cs drafted by a solicitor. US-based T&Cs, for example, vary according to the state, and are far more complex than any T&Cs pertaining to England and Wales. In addition, general clauses might not be appropriate for your business, and ones you need may be missing.
Ensure your terms and conditions meet statutory rights and offer consumer protection. Consumers are protected under English law, so you can’t strip back these protections in your T&Cs.
Is agreeing to terms and conditions a contract?
Agreeing to terms and conditions constitutes a contract under English law provided certain conditions are met, including that all parties must agree to the terms and conditions for them to be legally binding. Make sure your T&Cs can be enforced.
Are unsigned T&Cs enforceable?
An unsigned contract can still be valid if it is clear both parties intended it to be legally binding. However, the lack of signatures makes evidence of intent weaker. For example, an unsigned construction contract and its terms and conditions can still potentially be enforceable under English law, but it introduces some uncertainties.
Contact Heald Nickinson Solicitors
Following proper legal guidance when drafting contract terms and conditions enables businesses to safely deliver products and services to customers while protecting their interests. Comprehensive terms make transactions run more smoothly and head off areas of disagreement down the road.
Always work with a solicitor who is experienced in contract law. Contact us our experienced team of commercial lawyers for a quote today.
Fill out the online form on our website or call 01276 680000.
