If you are in business, I urge you to take ten minutes to read on. At the end of this note, you will know:-
(a) how well drafted standard terms and conditions can limit commercial risks to your business;
(b) which key standard terms you require;
I have been acting for commercial clients for twenty years. The businesses I have represented that have paid attention to this issue have saved millions of pounds and the businesses that have not has cost a similar amount.
Let’s be clear, standard terms are ‘standard,’ not a perfect reflection of your trading relations. However, if you get the important clauses right, they will have an enormous effect in reducing your firm’s contingent liabilities.
I have drafted the national and international terms of business for public limited companies and have even drafted terms of business for the sale of specialist steel to nuclear power stations. Understandably, everyone took a great deal of care in drafting those arrangements, but the basics remain the same and your business can benefit from those basic safeguards, simply and easily.
1. Limit your promises
Legislation imposes contractual promises on a seller. We know many of them well. “Goods will be fit for the purpose and of satisfactory quality,” “services will be supplied with reasonable skill and care.” In the absence of agreement deliveries will be made “within a reasonable time.”
The first thing your standard terms will do is limit these promises insofar as it is lawful to do so.
We all want to give a good service to our customers and clients but when things go wrong and a dispute evolves, limiting your contractual obligations can save you money.
2. Limit claims against you
Good standard terms limit the type of claim that can be bought. They limit the remedies available to your customers, for example, they may say that claims must be limited to the supply of replacement goods or that any claim is limited to a certain figure and / or to the contract price.
Standard terms should also impose strict limits on the timeframes within which claims may be bought and / or provide for deemed acceptance of the goods.
4. Set Off
An effective “no set off clause” can prevent your customer refusing to pay whilst a dispute is resolved and in these tough economic times can prove to be extremely useful.
Your standard terms should say that delivery times are estimates only, because if things go wrong, claims for late delivery can often be avoided.
6. Retention of Title
Retention of title clauses are lengthy and require special processes if they are to be enforced successfully. If you are a business supplying significant quantities of tangible goods and giving large volumes of uninsured credit, I strongly recommend you read my blog regarding retention of title clauses.
Many of you will be businesses selling solely to the UK market and not making international supplies. Even if this is the case, do not forget that when it comes to the law, Scotland is a different world, and in any event, you should ensure that any dispute that arises is resolved on your home territory.
8. Superfluous language
Many sets of standard terms and conditions are printed minutely and contain a vast array of standard clauses that may or may not ever be relevant to your business. It is recommended, insofar as possible, to avoid such terms.
The golden rule is to keep it simple and recognise that these are standard terms, designed to effectively limit your promises and liability in regard to day to day business, rather than to provide for every conceivable situation.
Get your terms incorporated
Do not forget to ensure that your standard terms are incorporated, see my blog.