The short answer is yes; as most businesses use standard terms of business to govern the supply of goods and services. It is worthwhile putting proper procedures in place to ensure that the company’s standard terms are effectively included in its contracts, as the consequences of failing to invest time and money in having standard terms drawn up for your business could be costly in the future.
There are a number of benefits to having standard terms of business:
- Ensures that you have a binding legally enforceable contract with customers;
- Defines the obligations of the parties and the consequences of non-performance of these obligations;
- Excludes and/or modifies the default rules applied by general law which are inappropriate to the particular business;
- Allocates risks between the parties, and;
- Minimises the scope for any disputes and provide a process which would apply in the event of any dispute.
It is worth noting that standard terms of business are not negotiated therefore, they will usually be more favourable to the party for whom they have been prepared. However, for commercial and legal reasons they should not be too one-sided – a completely one-sided set of terms may mean that a customer or supplier is reluctant to enter into trade with your business. Also, if a dispute did arise, the fact that the terms are completely one-sided may be taken into consideration by a court in deciding the reasonableness or fairness of a term.
One size does not fit all
A set of terms may have to govern a number of contracts with different parties, so it is wise to ensure that a legal adviser draws up the terms for the business. Where a business supplies different types of goods and services, it may need two or more different sets of terms of business.
- A business which provides both the sale and hire of plant and machinery will need to provide two sets of terms – one for sale and one for hire; and
- A business that deals with both consumers and non-consumers will need separate sets of terms (the laws that apply to consumers and businesses are different and therefore the terms should be tailored accordingly).
The importance of getting it right
If you ‘crib’ from other trader’s standard terms, you cannot be sure that they are legally compliant or have been drafted with your business in mind. It is prudent to take legal advice on how to incorporate these terms into your business relationships. Therefore, you will need to put procedures in place to ensure that the terms form part of the contract with your customers, and that they take precedence over any terms which they may propose. A legal adviser can help you ensure that your terms do not conflict with any implied law or be deemed ‘unfair’ – including unfair terms in contracts with customers could result in those terms being unenforceable.
Terms are not set in stone
Once the standard terms are finalised, it is recommended that they are reviewed every three to five years. Over a certain period of time, circumstances will change or develop – and these issues can arise in the day-to-day running of the business if terms are not kept up to date. The law is also continually changing – whether through legislation or case-law -and these changes could impact on your standard terms of business.
Are you starting a new business?
To help new businesses in these uncertain times, we have prepared a free start-up pack. The pack contains useful guidance highlighting the key actions to undertake and issues to consider so that your new business has the correct legal framework and protection from the outset – and ensuring your start-up business has every chance of success.
To download our free legal start-up pack, please complete your details here.
Want more information and advice?
For more information and advice on legal considerations for start-ups from our corporate legal team or guidance on setting up a company through our company secretarial service, get in touch with a member of our team below:
Theresa Grech, Partner and Head of Corporate, at [email protected]
Karina James-Wiltshire, Corporate Legal Executive, at [email protected]
Melanie Kincaid, Head of Corporate Support Services, at [email protected]
The information above is not and should not be taken to be legal advice. You should not take action or omit to take action based on this information.