In Short
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Use well-drafted terms and conditions to define payment, scope, liability and termination rights.
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Protect your intellectual property (IP) and confidential information via registration and NDAs.
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Hold appropriate business insurance, especially for liability risks and unexpected legal claims.
Tips for Businesses
Review your contracts and IP setup regularly as your business evolves. Insist on NDAs with partners and contractors. Work with an insurance broker to tailor cover to your operations. Staying proactive is much cheaper and safer than reacting to disputes.
Running a business can be a difficult job, which comes with risk. Business owners must consider and address many potential challenges to help protect them from legal issues and disputes from arising. This article will explore three key ways to reduce legal risk for your business.
Well-Drafted Terms and Conditions
Terms and conditions are one of the most important legal documents for your business. They are legal terms designed to help protect you when things go wrong. Using terms and conditions is not always mandatory unless your services are regulated, for example, by consumer laws. However, asking your customers to sign terms and conditions before you do business with them is highly advisable.
Some key provisions your terms and conditions should include are:
- payment terms stating when you must be paid;
- how to end your agreement with the customer; and
- your liability if you fail to deliver to the customer what you promised.
If you do not use terms and conditions, you expose your business to high risk and various problems. For example, customers could:
- fail to pay;
- misuse your intellectual property rights (IP); or
- complain about the scope and delivery of your services if you do not clearly define and document them.
2. Protecting Your IP and Confidential Information
IP is an extremely valuable business asset. The most common types of IP rights for a business are typically copyright, trademarks, design rights and trade secrets. Some businesses also obtain patent rights to protect their inventions, although patent protection can be very difficult to obtain in practice.
You can protect your IP by taking various steps. For example, you can formally register your trademarks (such as your logos) and sign contracts to ensure your business is the legal owner of any IP created by external third parties. The process for trademark registration in the UK is relatively straightforward and can help prevent infringement problems. Having a registered trademark can act as a deterrent to prevent third parties from using your brand and logos without permission.
It is advisable to also monitor whether any third parties are using your IP without permission so that you can swiftly take action before damage occurs.
Additionally, protecting confidential information is critical. You should use a non-disclosure agreement (NDA) to explain your confidential information and limit how third parties you share it with can use it. An NDA is extremely important in certain circumstances, for example, where you plan to share confidential information with potential business investors. Using an NDA can help prevent your information from being disclosed or released into the public domain.
Continue reading this article below the form3. Obtaining Business Insurance
Various types of business insurance can protect your business from unforeseen liabilities (such as unexpected legal claims and costs). Having an appropriate type of insurance cover in place could help cover your losses in the event of unexpected problems, such as cyber security breaches. Without adequate insurance, even small claims can threaten your business’s financial stability and force closure.
The types of insurance your business will need will depend on your business activities. Some common examples of business insurance include professional indemnity, employer’s liability and product liability insurance. Certain types of insurance are mandatory (such as employer’s liability insurance), whilst others are highly advisable to protect your business and put your mind at ease. Professional indemnity insurance, for example, is particularly crucial for service-based businesses that provide advice or expertise to clients.
Taking advice on insurance from a business broker is recommended to obtain niche recommendations on your business risks and place appropriate cover.
Download this free Supplier Contracts Checklist to ensure your contracts will meet your business’ needs.
4. Conducting Regular Audits
Regular legal audits are essential for identifying potential problems before they become costly issues. It could be useful to schedule regular compliance reviews to audit your internal policies to ensure they remain adequate. Additionally, when considering new ventures, it is important to conduct thorough due diligence, which can help identify potential liability exposures beforehand and allow you to make informed decisions about risk mitigation policies.
However, issues can still arise, and to combat them, it is always useful to establish clear procedures for handling risks. This combination of proactive monitoring through regular audits and effective response procedures ensures you can both prevent legal issues from developing and manage them efficiently when they occur, ultimately protecting your business while maintaining operations.
For example, if you discover during your annual audit that customer contracts contain outdated terms and the insurance coverage no longer matches your business’s current activities, you can address these gaps before problems arise.
Key Takeaways
Running a business is not without legal risk. Unfortunately, most businesses run into problems and disputes at some stage in their journey. However, you can prevent problems by considering your commercial contracts, IP and confidential information, business insurance and regular audits. Being proactive in safeguarding your business will help give you comfort in knowing that your business has more protection from potential legal pitfalls and allow you to focus on growing your business.
If you need legal advice on protecting your business from risk or find yourself in a dispute, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Having terms and conditions is only mandatory in certain circumstances (such as where you are delivering products and services to consumer customers). However, we highly recommend using a set of terms and conditions to protect your business from various risks.
In the UK, only employer’s liability insurance is a legal requirement. You should take advice from a broker on your specific business and which insurance cover is needed or recommended for your protection.
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