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As a supplier of products or services, you are likely to work with a range of commercial customers during your business journey. You will need to ensure you enter into a legally binding agreement with your customers so you have terms to govern your contractual relationship. For several customers, you may agree to provide a standard service. Other customers may have more bespoke and nuanced requirements. This will inform the type of contract you agree with your customers. This article will explore the difference between bespoke contracts and standard terms and conditions with business customers.
Importance of Having a Commercial Agreement With Customers
As a supplier, having a clear record of the commercial terms you have agreed to with your customers is vital. A contract is an important document to govern your legal relations with customers and gives you various legal rights.
In particular, you should reach an agreement formally recording key express terms, such as:
- which products or services you will deliver;
- your timeframes for delivery;
- provisions around how each party may use the other party’s intellectual property rights;
- the cost of the products or services;
- your payment terms; and
- a termination clause setting out how each party can exit the agreement.
A commercial agreement can help protect your business significantly if things go wrong. For example, it can help reduce or limit liability for breaching your contractual obligations. It can also help protect you from various risks, such as giving you certain rights if your customer fails to pay.
You will be exposed to significant risks without a commercial agreement with your customers.
What Are Standard Terms and Conditions?
Standard terms and conditions are generally a set of legal terms that form part of your customer contract. They will be commonly annexed to an Order Form, Purchase Order or Scope of Work document, which describes the products or services the customer orders.
Standard terms and conditions allow you to streamline and standardise your contractual arrangements. This is because you can use one set of standard terms and conditions that you issue to all customers to sign. It is important to ensure your standard terms and conditions form part of your customer agreement and are properly incorporated.
It is common for suppliers to state that their standard terms and conditions are non-negotiable. Therefore, suppliers who deliver very similar products or services to a range of customers will often rely on standard terms and conditions. For example, standard terms and conditions would be suitable for a business that:
- delivers non-bespoke products to customers;
- has set delivery times; and
- has a standard cost for all products.
Standard terms and conditions are often a quick and easy way for suppliers to contract. These terms are often ‘ready to go,’ and a supplier can quickly issue them to customers.
Some customers may, however, seek to propose changes to a supplier’s standard terms.
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What is a Bespoke Customer Contract?
In contrast to standard terms and conditions, your business could also agree to a bespoke contract with a business customer. A bespoke contract would involve a detailed discussion of the commercial terms, negotiations between the parties, and drafting a tailored contract. In this instance, rather than issuing standard and generic terms and conditions, you would likely need to draft a new contract from scratch.
Certain projects may require you to draft specific and bespoke terms. In this case, using generic terms is unlikely to be appropriate. A bespoke contract may be appropriate for specific customers with particularly niche requirements.
For example, a business customer who requires a niche set of services and deliverables by specific dates may benefit from a bespoke contract. For such a project, standard terms and conditions may be inappropriate and not fit for purpose.
Seeking Legal Advice
There are significant differences between contracting using standard terms and conditions or agreeing to a bespoke contract with each business customer.
Commercially, the types of documents you use could impact your business costs, time and customer conversion rates. For example, depending on the type of business you run, some customers may not have the time or resources to negotiate lengthy commercial agreements with you. In this case, standard terms and conditions may offer a quicker and more cost-effective option.
However, in contrast, large corporate customers may want their legal teams to get involved and negotiate bespoke agreements containing specific provisions. For example, certain large corporations and public companies may need to include specific contractual clauses for compliance and supply chain management purposes (such as anti-bribery and anti-corruption, money laundering and data protection provisions).
If you are unsure which type of contractual document is most suitable for your business or a particular project, you should seek legal advice. An experienced commercial solicitor can help guide you on the appropriate type of contracts for your business and support you with contract negotiations. Depending on your business offering and client base, the types of contacts you require may also change over time. A commercial solicitor can further guide you on any updates or changes in the structure required for your contracts.
Download this free Commercial Contracts Checklist to ensure your contracts will meet your business’ needs.
Key Takeaways
There are key differences between using standard terms and conditions and negotiating bespoke contracts with your customers. The type of agreements you require will depend on your business activities, the types of customers you work with and their bargaining power. If you are unsure about which contracts your business should use, you can work with an experienced commercial lawyer to support you and prepare contracts that will be appropriate and effective.
If you need help preparing contracts, our experienced contract 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.
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