Why you need terms and conditions

Published: 18th January 2022
Area: Fast Growth & Start Ups

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All businesses should have standard terms and conditions of business. Unfortunately, these are often a low priority by companies and may only be given detailed consideration when a dispute arises, by which time can be too late.

In the meantime, your sales team, without the knowledge of the legal department, be issuing quotations or processing orders using terms that are out of date, unsuited to the company's current business needs or simply copied from terms used by the company's competitors (or arguably even worse from other types of business altogether invariably making them even more ill-fitting and unsuitable).

If sales staff are not following proper contracting procedures, they may sometimes not even be contracting on the company's own terms, because better-trained purchasing departments have succeeded in substituting their own.

The pros and cons of using standard terms

There are many benefits to using standard terms
  • They avoid the time and expense of drawing up specific terms for each individual transaction.

  • They enable a company to introduce terms favourable to itself in a format that does not encourage heavy negotiation, for example, terms limiting the supplier's liability (in the case of terms of sale) or extending the supplier's liability (in the case of terms of purchase).

  • They provide certainty that the company will be trading on broadly consistent terms that comply with the company's policies and procedures.

  • They allow for standardisation of a company's contracting procedures, and for contracts to be handled and concluded by more junior staff.

There are some limitations to using standard terms
  • There are greater restrictions on the extent to which a company is allowed to exclude or limit its liability where trading on standard terms that have not been individually negotiated or where the company is contracting with a consumer. Certain terms may be unenforceable altogether and others may be enforceable only if they satisfy special tests of reasonableness or fairness.

  • The standard terms must be incorporated into the contract between the supplier and the customer in order to be binding.

  • There is a danger of staff using the standard terms for transactions for which they are not appropriate. As a safeguard against this, companies can, for example, establish procedures where proposed contracts over a certain value are sent to the legal department for review before they are issued.

  • The use of standard terms cannot be relied on in place of commercial measures such as the maintenance of adequate credit or quality control procedures: they should be in addition to, rather than in substitution for, such measures.

  • Standard terms require regular review in order to ensure that they take account of legislative changes or new case law and reflect any changes in the business activities of the company.

  • A business may still need to have more than one set of standard terms if it provides a variety of significantly different goods (for example, off the shelf goods and bespoke goods.)

Having correctly drafted and incorporated terms and conditions can save businesses considerable expenses in the long run.  Legal action further down the line can be expensive and drawn out so getting it right from the start can reap benefits.

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Ed works with clients from all sectors (particularly healthcare/life sciences, sport, technology, media and communications) on wide-ranging non-contentious contractual, IP, data protection and competition law issues.

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