Tue 27 Jan 2015

Top 5 myths about terms and conditions

A well drafted set of terms and conditions can help you protect your legal position as well as giving you certainty as to your rights and obligations in your relationship with your customers. Perhaps understandably, business owners can see the preparation of terms and conditions as an unnecessary use of time and resources. As a result, I often come across certain misapprehensions about the need for terms and conditions, which I'm keen to dispel.

We don't need any terms and conditions - we agree things by email or in person

Many business owners are happy to work on the basis of what has been agreed with their customers and, yes, in theory, oral contracts or contracts formed in correspondence are as enforceable as a written contract. However, a written set of terms and conditions provide a certain and clear record of what was agreed between you and your customer. Three years down the line, you can look back at the terms and conditions and know immediately what was agreed. Can you remember that conversation you had in 2012? Do you still have the email you sent setting out the delivery schedule back in 2013? Terms and conditions avoid you having to trail through your inbox or, worse, your memory. 

We don't need bespoke terms and conditions - this set we found on the internet will work

Perhaps even worse than not having a set of terms and conditions is having a set which simply don't work for your business. Despite this, I do come across businesses which have "borrowed" terms and conditions from competitors, other businesses or even just a Google search. Apart from the possible breach of someone else's copyright, there are so many problems with this approach that I can't set them all out here, but some of the issues I've come across include:

  • terms which simply don't work for the business for which they are being used;
  • references to the laws of another country, (typically the US) which are, at best, meaningless and at worst, misleading;
  • mismatched clauses cannibalised from a variety of places, causing confusion and uncertainty; and
  • inclusion of meaningless clauses while missing out important ones.

We should be able to draft our terms and conditions off the top of our head

Before I can draft terms and conditions for a client, I need to ask them about their business and how it works. There's no point having a legal and enforceable set of terms and conditions which don't reflect the way your business actually works. For example, a clause that says the customer will be invoiced on completion of the works is inappropriate if your procedure is actually to ask for payment in advance. I need to have a pretty good understanding of how your sales process works before I can put pen to paper, so be prepared to explain your business. As a side benefit of this interrogation, I may be able to help you tweak your process to reduce business risk. 

Whatever our terms and conditions say, goes

It's important to remember that terms and conditions don't exist in a vacuum. There are many laws and regulations which apply to your business and some of these will continue to apply, regardless of what your terms and conditions say. When dealing with consumers, there's a wealth of consumer protection legislation which prevents you from limiting the consumer's rights. For instance, it's impossible to exclude your liability for personal injury or death caused by your negligence. All of this must be borne in mind when considering your terms and conditions. 

Now that we've got our terms and conditions drafted, we never need to take them out of the drawer again

While I always try to draft terms and conditions which have as much longevity as possible, you need to keep them under review. This goes back to making sure that you use terms and conditions which reflect how your business works. If your business model has changed since the document was drafted, then some changes may be required.

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