How to Avoid Common Errors in Business Terms and Conditions

Suppliers often ask customers to sign their terms and conditions for speed and ease in today’s busy business world. Using terms and conditions can streamline contract negotiations and make trading more manageable by applying the same standards for all customers. However, there are various pitfalls to watch out for when using business terms and conditions. Making common errors could put your company at risk of harm. This article will explore avoiding common errors for suppliers to avoid in business terms and conditions. 

What Are Business Terms and Conditions?

As a trading business, your customer contract is a vital legal document. Your contract will offer you legal protection from risk and set out the terms on which you agree to do business. 

Often, businesses use ‘standard terms and conditions’ for customers. These are typically standard legal terms offered for all customers instead of a bespoke contract. Using terms and conditions means applying the same terms and standards to all your customers. Commonly, standard terms and conditions will be attached to an Order Form or Purchase Order setting out the commercial terms of the customer’s project. The customer must agree to the standard terms and conditions, forming part of their agreement with you as a supplier.

What Are Common Errors to Avoid in Business Terms and Conditions?

It is essential to take time and care when preparing business terms and conditions. You will have various considerations as a supplier operating using terms and conditions. You must avoid common mistakes in your contractual agreements and terms. 

 For instance, you should ensure your terms are:

• clear and unambiguous;
• bespoke and tailored to reflect your products or services; 
• comply with any applicable legal requirements; 
• include legal terms to protect your business from risk; and 
• are correctly incorporated into your customer contracts. 

Below are some critical common errors to avoid when using business terms and conditions. 

1. Ensure Your Business Terms and Conditions Are Clear and Bespoke

Key risk issues and common errors in business terms and conditions include:

•  a lack of clarity; and 
• terms being too generic. 

Ensuring that your business terms and conditions are correct, tailored to your business activities, and bespoke is essential. Otherwise, ambiguity could lead to mismatched expectations and problems from customers. Both parties to a commercial relationship must have contractual certainty and know what they are signing up for and what they need to do under the contract. 

When drafting business terms and conditions, you should carefully consider the products or services you offer and ensure your terms clearly set out your customer obligations. 

 Ensure your contract clearly lays out key terms, including: 

• which products or services you will deliver; 
• when you will provide them; 
• any relevant disclaimers or caveats the customer should be aware of; and
• precise details around payment terms, including when and what the customer needs to pay. 

By including clear and specific details about your obligations, there will be less chance for misunderstandings. 

If your terms are not bespoke enough, you will lack legal protection. For example, you may argue with your customers about issues not laid out in your terms and conditions. 

For instance, there could be arguments around intellectual property ownership if your terms do not specify which party will own any intellectual property rights created under the agreement. Or, there could be arguments regarding the use of data if your terms and conditions do not specify how and why you will use the data of your customers (such as customer email addresses). 

2. Ensure Your Business Terms and Conditions Incorporate Your Contracts 

Ensuring that your business terms and conditions are legally binding is crucial. A common error occurs when a contract fails to incorporate terms and conditions properly. This can lead to several risk issues, including ambiguity, customer complaints, and disputes. For instance, if a customer argues that they did not agree to your terms and conditions and, therefore, those terms do not govern your contract.  

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You can take vital steps to ensure your terms are correctly incorporated and legally binding. For example, you can:

• include a statement boldly explaining that your terms and conditions form part of your contract, attaching the relevant terms or providing a clear and easily accessible link to them; and
• clearly bring the terms to your customer’s attention – for example, by sharing a copy and asking for confirmation of acceptance. 

This approach will leave little room for ambiguity and help ensure your customer accepts your terms and conditions. 

3. Ensure Your Business Terms and Conditions Are Not Unreasonable

When trading using your standard terms, you must consider applicable legal rules. Significantly, the Unfair Contract Terms Act 1977 (UCTA) rules. Under the UCTA rules, certain terms in a contract are subject to a reasonableness test, such as clauses limiting liability. 

UCTA may deem some business terms and conditions as unreasonable. Unreasonable terms can be found to be unenforceable, meaning the supplier will not be able to rely on them. This could be extremely risky in practice. 

For example, your customers could:

• complain that your terms are unreasonable and challenge them, particularly where they are unhappy with your products or services; and
• challenge your terms in court – in the worst case, a court could deem your terms unreasonable and unenforceable. This could mean you lose the protection under the unenforceable terms. If a court finds that your liability clauses are unenforceable, this will mean unlimited liability for your business. 

It is far better to avoid these arguments from the outset rather than risk the argument escalating into costly and stressful litigation in the hands of the courts. 

Key Takeaways

Business terms and conditions are hugely beneficial to suppliers of products or services. Using terms and conditions allows you to streamline contract negotiations and protect your business from risk. However, there are critical pitfalls to avoid when using terms and conditions. For example, you should ensure your terms correctly reflect your business activities and do not contain unfair terms that could be deemed unenforceable. You should avoid these common mistakes when using terms and conditions. 

You can work with a commercial contracts lawyer if you need help preparing terms and conditions that are free of such errors and offer you legal protection. 

If your company needs help with terms and conditions, avoiding errors or legal advice on the terms of a contractual agreement, you can contact LegalVision’s experienced contract lawyers 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.