Do you have insurance for your business premises? Your vehicles and equipment?
I expect you do, because we all know that business contains risks.
How about properly drafted standard terms and conditions for your business?
Maybe you cannot answer this particular question so assuredly, but attending to your T&Cs is vital for risk management for your business. Standard terms of sale are a critical tool for every trading company. They profoundly reduce the risk of doing business.
They can protect you when everything else goes wrong. They are the insurance your company just can’t buy.
One properly drafted standard terms and conditions legal document can cover millions of pounds of trade over several years and it won’t deter your customers from buying from you.
So why haven’t you renewed or updated your standard conditions of sale? And why haven’t you trained your staff about how important they are?
Let me explain the seven risks you’re taking by not incorporating, or not updating, properly drafted standard terms and conditions.
1. You provide an unlimited financial warranty for the goods & services you sell
Your financial warranty should be limited and the risk shared sensibly.
Even the most generous warranties have limits! You should take care to make sure it is not your company’s responsibility to pay out unlimited amounts for loss or damage, especially if you were let down by your supplier or if you only made a small percentage on the trade.
2. You agree to be responsible for any and every foreseeable financial loss
The range should be narrowed.
Is your product destined for your customer’s number one client? Do you feel comfortable compensating your customer if he loses that client? Is that your responsibility?
3. You provide onerous contractual promises about your company’s goods and services
These promises are implied into a contract of sale by statute and should be excluded.
Under English law a product will be deemed fit for the purpose for which it is supplied even if that purpose is novel. Why is your business taking that risk?
Your company should be more than happy to confirm that its products comply with their specifications and/or match any sample. Isn’t it for your customers to check that the product they chose is what they needed?
4. You accept any additional adverse terms applied by your customer in his Standard Terms and Conditions
These should be ousted.
Take a look at your customer’s terms. See the one that says time is of the essence for delivery. If you are a day late your customer can cancel the order and sue you! What if he has a change of heart, and didn’t want the product, he may be looking for a way out.
5. You accept that your customer can delay payment of a bill by raising virtually any complaint no matter how spurious
The right of set off should be denied.
One thing that greatly influences the outcome of any commercial disagreement is who holds the money. Are you happy to agree that it’s your customer? Make sure if a dispute arises that it is you that holds the money so that you remain in control.
6. You accept your customer owns your goods on delivery even if he hasn’t paid for them
Include a proper retention of title clause.
It is a fact of life that many companies in financial distress use a supplier’s cash and goods as working capital while they plan to reorganise their own business, often using what is known as a pre pack. Including a proper retention clause in your terms of business means that your goods cannot be used in this way.
7. You happily pass on the Intellectual Property in any design work you have undertaken for a customer no matter how valuable
In the absence of terms to the contrary, any development work undertaken for a customer on a project could well end up belonging to your customer, even though it may be work that is the very essence of your business and valuable to you.
How many of these risks are you taking with your company?
One properly drafted legal document can be your insurance against them all.
Contact Patrick Tedstone or Lorraine Smith today on 01785 223440, or email firstname.lastname@example.org to discuss incorporating or updating your standard terms and conditions, and getting the protection your company requires.