How Terms & Conditions of Business safeguard your business and its reputation
It is not unusual to come across parties entering into an agreement concerning goods and services without having a signed formal contract in place. Many agreements are performed and fulfilled without incident but when a dispute arises, there can be severe consequences – worst case scenarios casting doubt on the ability for the business in question to carry on its operations.
It is of no surprise that a formal written contract, incorporating all of the terms and conditions of business applicable to the arrangement, is the most beneficial means of ensuring that the parties to it are aware of their respective obligations and know what is expected of them generally. The contract may assist the parties should they wish to clarify their position and should set out the terms clearly so that disputes can be avoided or at least resolved at the earliest opportunity.
However, even if there is a signed contract in existence, it may be useless if procedures are not in place to ensure that it is the terms and conditions contained in that contract that apply to the relationship. This can be of particular relevance as by the time a dispute raises its head, it is often too late to do anything about it. You may be left having to pursue a potentially lengthy and expensive Court battle to resolve matters.
General contractual principles are that a contract is formed by offer and acceptance (or agreement). In some cases, this may be clear from an express acceptance of the terms and conditions or from the conduct of the parties at the time. However, in other cases, such as where there have been protracted pre-contractual negotiations or where a party begins to perform a contract subject to on-going negotiation but makes clear that it does not accept the other’s terms and conditions, it may not be easy to establish when the contract was formed (if at all).
If the matter cannot be dealt with by other means, in the case of dispute a Court may have to determine the issue.
The Court could consider that in the circumstances neither party’s terms apply and, therefore, imply terms that it considers to be appropriate. Alternatively, a Court may even find that in fact no contractual relationship came into existence but the supplier is entitled to a reasonable fee for goods or services provided.
Of course, a Court determining the issue means that you will have had to have gone to the time and expense of Court proceedings, leaving matters to the discretion of the Court with no guarantee as to the outcome.
In light of the above, it is important to consider the following elements when seeking to rely on your
own terms and conditions of business:
- Ensuring that the other party has had reasonable notice of the terms and conditions – for example, new contract terms cannot be introduced after the contract has been formed, unless agreed by the parties. Further, seeking to impose terms and conditions of business by issuing them on the reverse of an invoice is unlikely to be sufficient because invoices are in many cases issued after the contract has been made.
- Has the other party accepted those terms or have they attempted to impose contradictory terms of their own? Beware of the other party confirming an order but saying it is subject to their own terms and conditions!
- Are the provisions of the terms and conditions of business clear and unambiguous? If you are seeking to rely on a particular term, you need to be able to demonstrate that it is clear and leaves no doubt as to what was intended.
- Do the terms and conditions give you the rights and protection required? You should carry out a thorough review of your operations to ensure that your terms and conditions cover what you want them to.
- Care must be taken not to use out-of-date terms and conditions; those that have been put together using a variety of precedents but which do not accurately reflect the relationship between the parties, the business operations or the nature of the business itself; or even, as indicated above, accepting another party’s terms in substitution for your own.
- Does your sales/contracts team recognise the importance of ensuring that your terms and conditions of business apply? Appropriate training and warnings should be provided which in turn should assist in minimising the risk of dispute.
Ultimately, written terms and conditions are incredibly important for your business operations. Not only can they protect your position in the event of dispute (acting both as an aid to settling matters and also by protecting you against the possibility of a claim being made in the first place), they are also good risk management practice. In some cases having terms and conditions can help to reduce the cost of professional indemnity insurance and, of course, they enhance your business image by showing you take things seriously.