There is a phrase known as 'over-lawyering' and many businesses may feel that they have trusted relationships with suppliers and customers and therefore do not need written terms and conditions. In fact, there are statutes like the Sale of Goods Act 1979 which are there to imply important terms into contractual relationships even when no terms are agreed. However, I should highlight some of following benefits of having written terms and conditions in place:
- Certainty of terms: contracting parties, term, description of goods/services, pricing, timings, delivery and acceptance are just a few terms which should be written down to provide certainty and therefore avoid disputes between the parties. Furthermore, lack of certain terms could void a contract which can be problematic when claiming for any loss.
- Limitation of liability: without a contract, your liability may be unlimited in amount but also you could be liable for all losses including losses which may not have been foreseeable. This may seem unfair but is a real risk for transacting parties. A written contract can help you manage your risk exposure and ensure you are legally protected.
- Insurance: who is insuring what and when? There are often conditions which can restrict or limit insurance claims. It is advisable to understand your insurance position and then limit your contractual liability accordingly to avoid any gap.
- Title: The default position on transfer of title is that it is linked to the moment the contract is made, or when the supplier notifies the customer that the goods are in a deliverable state. This means the customer may have ownership rights sooner than a supplier might expect! Most commercial suppliers choose to connect the transfer of title to delivery or payment through express drafting.
- Pricing: you can include terms which set out specific payment due dates (normally by reference to an invoice) and also include that "time is of the essence" meaning that non-payment may result in termination. You can also set interest rates due on late payments, require that payment be made in advance, and allow for price increases by references to inflation or the retail or consumer prices index.
- Intellectual property: if anything is being created, who will own the creative rights to the work? For example, websites are often created but ownership to the site may not have been transferred.
- Data protection: will any personal data be transferred between the parties. For example, names, bank details, emails or home addresses. Both parties must have policies and notices in place to comply with data protection legislation and non-compliance can result in potentially hefty fines.
- Termination: we often receive queries regarding a parties' right to terminate. Setting out written terminations events and valid notification processes means both parties understand their rights and post termination obligations like returning materials, destroying data and confidentiality.
- Jurisdiction: if you contract internationally, you can be clear that English law and jurisdiction governs the contract and therefore you are much less likely to encounter difficulties enforcing any claim due to a foreign law applying.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.