August 2007

Terms and Conditions of Business – Getting things wrong

Our last article explained the importance of have appropriate Terms and Conditions of Business (“Ts & Cs”) in place to set out in clear terms how a business operates. This article is aimed at providing a general and brief overview of the potential effects of either not having Ts & Cs, or having Ts & Cs that are not tailored to meet the needs of a specific business.

If a business does not have any Ts & Cs or they do not accurately reflect its operations, it has immediately put itself in a disadvantageous position – for example, if there is a dispute relating to a particular product or service provided, there is unlikely to be any written evidence to show what product/service was the subject of the agreement between the parties and how that product/service was to be provided. Lengthy and protracted arguments are likely to arise. Not only will these distract a business from its operations but they will also increase costs of dealing with the matter.

A detrimental effect will arise if it is deemed that another party’s Ts & Cs apply to the business relationship. Those Ts & Cs will no doubt be drafted to the advantage of that other party and are unlikely to be adequate – a situation which should be avoided as it can have a major impact on liability and the prospects of a successful outcome to a claim.

It is important to bring the Ts & Cs to the attention of customers and suppliers before any contract or agreement is entered into otherwise they may not be deemed to govern the business relationship. A “battle of the forms” may arise where opposing parties claim that their Ts & Cs apply and whilst this may lead to lengthy arguments, it is important to have Ts & Cs to be able to join the “battle” in the first place.

Ts & Cs can be used to protect the business by, for example, excluding or limiting liability. If a claim against the business is established it is far better to reduce the potential liability of the business than be exposed to unlimited liability which may ultimately be greater than the value of the original contract between the parties.

Litigation can be expensive and accordingly it is beneficial for a business to protect itself as much as possible and be able to back up all arguments it may have with appropriate evidence. Of course, a successful outcome to a case cannot be guaranteed. However, having a full compliment of documentation and evidence means that not only can we fully assess the merits of any claim that may arise, we can also put the best possible case forward.

Ts & Cs can also assist a business with credit control. It is a major area of concern for many businesses – if payment for goods/services is not received, insolvency may not be too far away. Ts & Cs can state the time for payment of any invoices raised. If payments are not received when due in accordance with the Ts & Cs, appropriate action can be taken to recover those sums as soon as possible.

Baily Gibson can assist with the preparation of Ts & Cs and offer advice in respect of litigation arising in connection with the business. Accordingly, should you require any further or additional information, please contact our offices.