26 September 2018

Key clauses that make or break your terms and conditions

Having terms and conditions in place protects you as a business because terms and conditions have an important role to play when it comes to a supplier and customer understanding their respective duties, rights, roles and responsibilities.

A well drafted and comprehensive set of terms and conditions should act like a manual for doing business and should provide absolute clarity on what should happen in any given situation. They should also save significant time and expense by addressing all issues at the outset. This, in turn, should help avoid disputes later on about what might or might not have been agreed. The exact elements to include will vary from business to business but the following are some of the key clauses to include in B2B terms and conditions.

Duration

Ensure that your terms and conditions are clear as to when any contract governed by them starts and finishes. The start could be a specific named date, the date on which the contract is signed or the occurrence of a specific event. Likewise, consider whether any contract governed by your terms and conditions should last for a specific period or whether it should be open ended. For fixed term contracts, you may want your terms to include provisions allowing for a mechanism for renewal or extension of the term.

Price and payment

Ensure that your terms and conditions are clear as to who pays what, how and when. As a supplier, you will want to ensure that terms relating to price enable you to take account of factors outside your control (such as increases in the cost of raw materials, delivery costs or import duties) although a commercial balance will need to be achieved between this and conveying a perception to customers that you can simply increase prices whenever and by however much you want.

Limitations on liability

These terms limit the damages that you have to pay your customer if your goods or services fail. They will cover situations such as what happens if you do not provide the goods or services as advertised, or if the goods supplied are defective or the services provided are inadequate.

If a claim is made against you, a limitation of liability clause will give you valuable certainty about your total financial exposure in such instances, by excluding and limiting the extent of any liability arising out of the supply by you of the goods or services. Certain liabilities cannot legally be excluded, whilst others can to the extent that the terms doing so are reasonable. Any cap(s) on liabilities which are not excluded must also be reasonable and you should ensure you can explain such cap(s) to customers, particular as customers often compare liability caps contained across their preferred suppliers’ standard terms and conditions.

Termination

In business, things often don’t go as you have planned, so you will want your terms and conditions to enable to you to be able to cut and run as necessary. Therefore, ensure that your terms and conditions contain provisions allowing you to stop supplying the goods or services if there are breaches that cannot be remedied at all or within a specified period of time. Also ensure that your terms and conditions clearly lay out the circumstances under which you, or your customer, may terminate the contract, including for the usual insolvency events on the part of your customer.

Force majeure

The phrase ‘force majeure’ literally translates as a “greater force”. Essentially, events can always occur that are beyond your, or your customer’s, control. For example, in the event of a natural catastrophe, a shipment may be unavoidably disrupted. You should always include definitions which are wide ranging and encompassing (including, for example, acts of terrorism, earthquakes, fires, explosions, civil war, commotions, riots, strikes etc.). This is important to ensure that any failure by you to supply the goods or services due to such an unforeseeable disruption is not to be considered a breach of the contract with your customer. Your terms and conditions should also outline the steps the affected party must take to notify the unaffected party of such events, along with the steps to be taken to reduce any loss potentially arising as a result.

Dispute resolution

Even the best-drafted terms and conditions are susceptible to conflict. However, they invariably form the contractual basis of ongoing commercial relationships. As a result, it is of utmost importance to ensure that terms and conditions clarify the parties’ plans for dispute resolutions in the event that a dispute arises, particularly where immediate court proceedings may not be in either party’s best interests.

In many supplier terms and conditions, it is now common practice to include an alternative dispute resolution (ADR) clause, requiring the parties to submit to ADR prior to, or in place of, formal court proceedings. Consider, therefore, including a dispute resolution clause which may allow contract related problems to be solved in a way which avoids traditional recourse to the courts and to preserve ongoing commercial relationships where necessary.

Governing law and jurisdiction

Nowadays, cross-border transactions are fairly routine. Where parties to a contract are located in more than one country, it may not be clear which country’s laws govern that arrangement and which country’s courts are able to hear any dispute in relation to it. If you are a supplier based in the UK, English law and English court jurisdiction should be your starting point.

The above are just some of the provisions that are crucial to your terms and conditions. However, it is important to note that there is no ‘one-size-fits-all’ standard and, therefore, to ensure that your terms and conditions are specifically tailored to your own business’ needs and drafted accordingly. For help and advice, please contact Richard Williams at rwilliams@hcrlaw.com.

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About the Author
Richard Williams, Associate Solicitor
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