The benefits of using written terms and conditions
By Daniel Burns, Partner and Head of Company Commercial
It can be tempting, especially for new, eager businesses, to start trading immediately without using any written terms and conditions or contracts.After all, there is no legal requirement for contracts to be written down and oral contracts are just as valid as written contracts. However, if a dispute arises over an oral contract, it can be extremely difficult to produce definitive evidence of what was agreed if nothing has been written down.
To avoid such a situation, it is strongly advised that you use a written contract whenever you deal with another party.By writing the terms of the deal down you gain much greater certainty about what has been agreed, you decrease the risk of disagreement, you limit your liability and the risk of having to go to court to settle a dispute. Using written terms and conditions is for the benefit of both parties.
Another advantage to writing your terms and conditions down is that you avoid terms that are implied into your contract by law.For example, if no price is ever specified then the price that will apply will be a “reasonable” one and what a “reasonable price” is, is clearly open to interpretation.
If you are able to prepare your own set of terms and conditions you get to set the agenda, by choosing terms that favour you.For example, if you are selling goods to a customer and you want to limit your exposure to any cashflow risks, there are several clauses you can use to try and limit your liability, such as:
- Using a retention of title clause – the effect of this clause is that until you have received full payment for the goods you will retain legal ownership of the goods, even if they have been delivered to your customer.If the customer was to go bankrupt/insolvent, then this clause should help you recover the goods as technically they belong to you and not the customer
- Requiring full payment in advance
- Requiring a deposit
- Requiring the customer to provide a guarantee
- Including a bespoke termination clause which says that on the occurrence of specified events (such as your customer becoming bankrupt/insolvent) you can immediately:
- end the contract
- suspend future deliveries of goods (including any instalments)
- cancel any existing orders
As well as thinking about the legal protections to be gained from having written terms and conditions, you should also think practically about what your customers will and won’t expect based on your market area and previous dealings – if your terms are too one-sided then your customers may not agree to them.
The above only covers a small amount of the details that should be considered where you are thinking of using a written set of terms and conditions.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.