Terms and conditions are frequently used in business in relation to supplies and purchases of goods and services and to set out rules of website use. Notwithstanding a heavy reliance in the UK on terms and conditions in a business’s trading relationships, there is a common misconception that the use of terms and conditions does not form or “count as” a contract.
The reality is quite the opposite – the use by a business of terms and conditions does (provided they are used correctly – more on this below!) form a contract and considering that terms and conditions tend to be used to govern, as a minimum, all run-of-the-mill business dealings, the consistency of which a business relies upon, their importance cannot be overlooked.
No one-size-fits-all
A business’s terms and conditions of sale and purchase ought to be tailored to that business to address its own particular trading risks. There is no one-size-fits-all approach. In drafting terms and conditions, we ask a business to think about the issues and challenges it has faced in the past so that we can look to put contractual protections in place to mitigate risk for the future and to reduce the likelihood of the same difficulties reoccurring. As they say, prevention is better than cure, and in this case that means investing time and effort in correctly implementing clear, thorough and unambiguous trading terms rather than dealing with contract disputes and litigation if your terms are challenged or the business relationship goes wrong.
Annual reviews
A business should review its terms and conditions on at least an annual basis but more frequent reviews might be required, for example, to address a new challenge, risk or service line. Legislative or regulatory changes might also necessitate updates – so keep an eye out for these.
As indicated above, terms and conditions will only be effective if they have been properly incorporated. If terms and conditions are set out or expressly referred to in a contract that the parties have signed, it can safely be assumed that the terms and conditions have been incorporated. However, more often than not, that will not be the case and the owner of the terms and conditions will need to establish that the terms and conditions were put forward to the other party before the contract was made, and that the other party accepted their incorporation into the contract. Obtaining advice and guidance on achieving this and the effective use and incorporation of terms and conditions is therefore important to ensure that the time and money invested in drawing up proper terms and conditions is well spent.
Own terms and conditions
Another situation to be aware of in the context of trading on terms and conditions is that known as the “battle of the forms”. A battle of the forms arises when two businesses are negotiating the terms of a contract and each party wants to contract on the basis of its own terms. Uncertainty can arise where, for example, one party sends a purchase order with its terms and conditions attached and the other party confirms the order by referring to their own terms and conditions. The key is to be able to identify that this has occurred so that a conscious decision can be taken as to how it is dealt with. One option is that the business opts to deal with the conflict directly, by discussing the terms with the other party and perhaps agreeing variations in a side letter. Alternatively, the business may decide to proceed without resolving the issue, trusting that the courts will decide that its terms prevail if a formal dispute arises. That approach is not without risk and shouldn’t be taken without due thought and consideration.
Adopting standard terms and conditions offer a number of advantages to a business including:
- Enabling a business to introduce favourable trading terms in a way which does not usually encourage heavy negotiation;
- Avoiding the time and expense of drawing up bespoke trading terms for each individual transaction;
- Providing a broadly consistent basis of trading; and
- Allowing for standardisation of a business’s contracting procedures.
However, certain legal and practical limitations ought to be borne in mind such as ensuring that the terms and conditions are effectively incorporated, training staff so that the terms and conditions are only used for appropriate transactions, having separate terms and conditions for distinct goods/services offerings and ensuring that the terms and conditions are regularly reviewed and updated to take account of legislative or regulatory changes and to reflect changes in business activities and processes.
If you haven’t reviewed your terms and conditions recently or if you haven’t applied real consideration as to how you are using your terms and conditions or perhaps you don’t have any terms and conditions at all, there is no time like the present to rectify that.
