Terms of Business

Terms of Business, also used interchangeably as Terms & Conditions/T&Cs/Standard Terms– most businesses will have them in one form or another or will have had to accept them to obtain goods, services or both from suppliers. They can be standalone, appended to an order form or invoice, or effectively set out in a more substantial written contract.

Do I need Terms of Business?

Ideally, yes. Frequently, smaller  businesses don’t bother with T&Cs or any formal written contract with their customers or suppliers. That may work if only minor issues arise, however it can create a potential nightmare if something major goes wrong, leading to time, effort and money having to be incurred trying to work out what has been contractually agreed.  

As a supplier, bigger customers will often expect to accept written Terms and Conditions or sign a written contract and will have the resource to cover this. As a scaling business a point will inevitably be reached where a robust set of written Terms and Conditions will help reflect the brand and provide sensible legal protection.  

In addition, engaging a lawyer to prepare a set of Terms and Conditions for your business provides an ideal opportunity to consider and address any standards in your sector, key risks and risk appetite.  

What do these Terms consider?

A huge part of these terms refer to the services provided. As a customer you'll want to ensure that the provider is committing to a decent quality of service. As a provider you'll want to agree to this as reasonably possible. It's common practice for provider to ensure they have a right to suspend services without liability if there’s a customer default - often a customer will push back on this so it's important to negotiate a happy-medium.

If goods are being provided, most suppliers want risk to pass on delivery but title only to pass on receipt of payment, to mitigate against risk of customer insolvency. Suppliers will want to ensure completion of delivery (or deemed delivery) is clearly defined with liability for non-delivery fairly excluded. As a customer you'll want to ensure delivery is on terms that work for your business and that risk passes at an acceptable point in time for you, i.e. once the goods are no longer in the supplier’s possession.

As a supplier, payment is likely to be one of your priorities. It's important to think about whether you will want payment in advance or arrears? Will you allow a credit period? As a customer you should ensure there’s an invoice dispute mechanism in case you're not happy later down the line. It's common for suppliers to exclude a customer's right to set-off and usually a customer will try to resist the set-off being excluded, so be prepared to have these conversations.

It should be clear in the Terms which IPRs are owned by which party and decided as to whether standard customers will own any IPRs in any deliverables. Appropriate licences should be included, e.g. a ‘back-licence’. As a supplier, if you receive a licence of customer IPRs to provide services, ensure you receive a suitable indemnity covering third-party IP infringement claims.

As a supplier, if you are providing goods or services, you will need to think about what warranty you are prepared to give. Are you a reseller passing on the benefit of a manufacturer’s warranty? Consider including specific remedies for breach of warranty e.g. repair or replacement.

If you are processing any personal data on behalf of your customer you should ensure appropriate data protection provisions are included either in your standard terms or in e.g. a separate addendum. In this instance, as a customer, you'll want to carry out due diligence (including in relation to technical and organisational measures) and try to obtain an appropriate indemnity from the supplier.

When it comes to liability, suppliers should ensure that exclusions and limitations of liability are drafted with the UCTA ‘reasonableness’ test and recent related case law in mind. They should align with any relevant insurance cover and if not receiving payment up front, investigate the customer’s level of assets to have an idea of what would be available to satisfy any judgment debt e.g. in the event of a debt claim for non-payment. As a customer you should be cautious of any supplier limitations and exclusions leaving you with meaningful remedies. Consider requesting proof of the supplier’s relevant insurance policies and investigate the supplier’s levels of assets to the extent possible to have an idea of what would be available to satisfy any judgment debt/settlement amount.

Thinking ahead to eventual termination, customers will and should push for rights to terminate for convenience and for supplier events of default e.g. ‘material breach’ in addition to common law termination rights. The Terms should spell out what will happen on termination so there is no ambiguity e.g. customers only pay for services properly provided/goods delivered in accordance with the contract. Equally, the supplier will want to Include their right to terminate for convenience and for specific events of default by the customer e.g. non-payment in addition to common law termination rights.

How are Terms of Business included in a contract?

Ensuring a good set of Terms is actually incorporated into the contract with a customer or supplier is just as important as the Terms themselves!  Most commonly, Terms can be appended to an Order Form or Statement of Work which is then formally accepted, are accepted by email or are signed, most typically through an e-signing platform such as DocuSign.  

As a supplier or customer, it’s important that your Terms and Conditions are accepted and so incorporated into the relevant contract before you start doing the things which the Terms say.  In addition,  when a supplier and customer are both trying to contract on their respective Terms, it’s important to know whose Terms are incorporated into the contract, to mitigate against the risk of disputing this subsequently if something goes wrong – the so-called ‘battle of the forms’.  

How can we help?

We specialise in providing cost-effective legal solutions clearing your path to success, which means our bread and butter lies in crafting, reviewing, and dissecting commercial contracts. From T&Cs to aaS agreements and commercial negotiations, we support the likes of Onfido, Multiverse, and Office & Dragons - ensuring they can build, break, or bolster their commercial relationships.

In need of support from commercial contract lawyers in the UK? Get in touch with our team.

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