When dealing with clients, be it an individual or another business entity, the terms and conditions of trade in which you do business with them are crucial in ensuring that your client understands the level of responsibility that applies to you and them, and ensuring a healthy cash flow for your business. It’s the terms and conditions, whether they apply to the provision of goods or to the services, that set out your responsibility to your client and your client’s responsibility to you.
As the terms and conditions set out such responsibilities in writing, it's crucial to ensure you get them right. It may be prudent to engage a commercial solicitor to draft the terms and conditions for your business, as they should be tailored to the goods and/or services that you supply or provide.
Terms and conditions should be set out in an easy to read and easy to understand format and should preferably be printed on the back of every quote, tax invoice and purchase order. Also they should be provided to the client when an Application for Credit, Contract for Supply of Goods or Contract of Engagement (“the Contract”) is signed by the client. It is also highly advisable that the client signs the Contract that confirms that the terms and conditions have been provided and accepted. This can be done in a hard copy format or an electronic format.
What to include in terms and conditions of trade
There is no hard and fast rule on what to include in your terms and conditions, but well drafted terms and conditions should act like a manual or recipe book for doing business and having absolute clarity on what should happen in a given situation. They should set out what the agreed terms are between you and your client and more importantly what happens if things go wrong or one party wants to leave or is unable to continue. Terms and conditions can also save a lot of money by addressing all issues at the outset. This in turn avoids disputes later on about what might or might not have been agreed.
The exact elements to include depend on the individual business but should include:
- A clear definition of what products or services will be provided;
- Setting out the payment terms – when is payment due;
- Any guarantees or warranties offered;
- Timelines for delivery and any queries;
- Specifying what happens if either party doesn't deliver or pay or wants to end the relationship;
- The term of the agreement and what notice is required to get out of it; and
- Which law shall govern the contract?
Plainly, if you don't specify terms and conditions, you put yourself at risk of uncertainty and misunderstandings – it's vital to establish the actual arrangement between you and the client in the provision of goods or services.
Lawyers often advise clients that if there is nothing in writing there is basically no proof, and equally, if the terms and conditions are in writing, it is evidence that can be produced before a court if the need arises.
Making things clear
Failing to specify terms and conditions in the supply of services and goods may also have a serious impact on the cash flow of a business, as the receiver of the goods and/or services may assume that he/she will need to pay upon completion and you will need to pay for the goods or engagement of other people before the completion. Therefore you will be out of pocket and you won’t receive payment until completion. This inevitably leads to disputes.
Equally, if you do not specify so in your terms and conditions, you may have no right to charge interest for late payment. So again you will be out of pocket if a customer pays late.
One size doesn't fit all
It is important to ensure that your terms and conditions are specifically written for your business. You can't assume another business will have the same needs as yours. Accordingly it is important that you consult a lawyer and obtain advice rather than attempt to copy someone else's terms and conditions as their business may be totally different.
The team of commercial lawyers at Andersons can also draft Letters of Engagement or Contracts for the provision of services and goods on behalf of clients.