Can My Business Terms and Conditions Be One-Sided in My Favour?

Terms and conditions are vital tools to protect supplier businesses from risk. As such, several companies adopt terms and conditions, which they draft heavily in their favour. For instance, by adopting terms which benefit the supplier but offer their customer little protection. Commercial parties are free to agree upon their contractual terms, so one-sided terms and conditions can be tempting as a supplier. However, this approach does come with certain legal and commercial risks. This article will explore some key issues to consider if your business customer terms and conditions are one-sided.

Why Are Terms and Conditions Valuable?

Terms and conditions are critical legal contractual terms that protect your business from risk. Rather than negotiating bespoke contract terms with each customer, terms and conditions allow you to adopt a set of standard legal terms to streamline your business contracting process. You can annex your terms to an Order Form document laying out your deal’s commercial terms.

When drafting your terms and conditions, you should carefully consider your business’s legal and commercial risks and prepare robust terms to prevent such risks. Well-drafted and strong terms can protect your business in several ways. For instance, terms can heavily limit your liability to customers for breaching your contractual obligations. 

What Should I Consider If My Terms Are One-Sided?

We will now explore some key issues to consider where your terms are one-sided.

1. Your Terms Will Offer Strong Legal Protection

By drafting terms heavily in your favour, you can significantly limit the risks your business could suffer.

Terms and conditions can include valuable provisions to:

• help you get paid on time;
• limit your liability if you breach your obligations; and
• help avoid and resolve disputes which arise.

Stringent terms to cover these issues can help you in several circumstances. For instance, you could significantly reduce the sums you would be liable to a customer for in a breach of contract claim. You can also include stringent payment terms, such as charging the customer interest for late payments or allowing you to terminate the agreement if they pay late. 

Whilst one-sided terms offer strong legal protection, there are some risks to note, as explored further below. 

2. You Must Be Careful About Unfair and Unenforceable Terms

Although you can seek to protect yourself with one-sided terms, you must be aware of certain legal rights and limitations when using terms and conditions. For instance, the Unfair Contract Terms Act 1977 (UCTA) contains legal rules around the reasonableness of certain legal terms.

If you are a supplier using standard terms and conditions, specific provisions such as your limitation of liability clauses will be subject to the restrictions under UCTA. If a court finds your business terms unreasonable, it could deem them unenforceable. Unenforceable terms mean you will be unable to rely on them. In the context of a limitation of liability clause, if it is held unenforceable, your liability under the contract will be unlimited. 

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You need to be careful about excluding certain liabilities. For instance, you may not limit liability for death or personal injury under any contract. This would be deemed unenforceable.

As such, you should be careful when drafting business terms and conditions to avoid potential arguments around certain terms being unreasonable or unenforceable. 

3. One-Sided Terms Could Slow Down the Contracting Process

Often, savvy customers will read business terms and conditions. They may also ask their legal teams to review the terms and assess how risky they are. Commercially, this is a crucial point for you to note.

One-sided terms and conditions could lead to several negative implications, such as:

• customers raising concerns and queries;
• customers asking to negotiate terms, resulting in protracted negotiations; or
• customers walking away if they think your terms are too onerous or unfair.

This can lead to increased time, costs, and resources. Worse, it may even stop customers from working with you. 

In contrast, adopting a more balanced set of terms could help you gain customer trust and conclude negotiations more quickly and successfully. Balanced terms could also help you get off to a good start in new customer relationships by offering fair terms to protect your customers from risk.

If you require support with drafting terms that protect your business transactions but take a more balanced and reasonable approach, you can work with a commercial contracts lawyer to support you. A commercial contracts lawyer can guide you on what is reasonable and best practice in your industry and suggest how best to protect your business whilst not alarming potential customers. 

Key Takeaways

As a supplier of services to several customers, you will understandably want to protect your best interests and prepare one-sided terms and conditions. 

Contracting using one-sided terms and conditions drafted heavily in your favour is possible. This approach can offer you significant legal protection in your legal agreement. However, you should note that there are also certain legal and commercial risks if your terms are heavily one-sided. For instance, one-sided terms may lead to questions and back-and-forth customer negotiations. In the worst case, some business customers may not want to do business with you if they feel your terms are too onerous and one-sided. You can work with a consumer contracts lawyer for advice on drafting terms that protect your business but do not prevent potential customers from working with you. 

If you need help drafting terms, LegalVision’s experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.