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As a business customer working with suppliers, you will often be asked to sign a supplier’s terms and conditions. While signing terms without reading the small print can be tempting, it carries legal risk. Nevertheless, once you sign a contract, you are generally bound by it. This article will explore what can go wrong if you don’t read the terms and conditions.
Why is it Important to Read Terms and Conditions?
Terms and conditions are contractual terms that set out the legal terms governing the sale of products or services. Often, a service supplier will require all customers to sign the same terms. The terms are usually non-negotiable and heavily favour the supplier.
You must read the terms to understand what you are signing up for as a customer and what your remedies are if the supplier breaches your agreement.
What Can Go Wrong If You Do Not Read the Terms and Conditions?
You may want to simply sign a supplier’s terms and conditions without reading them. For example, you may be in a hurry to start a project, or you may not have the resources to review the supplier’s terms.
The supplier might also state that their terms are non-negotiable, and you may not think it is worth reading them. However, you should always read the terms and conditions before signing a supplier’s agreement. Here are some examples of what could go wrong if you fail to read the terms and conditions.
1. Signing Terms and Conditions Which Are Not Fit For Purpose.
A key point about terms and conditions is that they are often standard, meaning they are not tailored to any particular customer. However, your requirements from the supplier may be unique and bespoke.
If you have agreed to specific commercial terms with the supplier, you must read their terms and conditions to ensure that your terms are incorporated into the agreement. If not, your contract with the supplier will not be fit for purpose, and this could limit your legal remedies if things go wrong.
For example, say you need a set of products delivered within seven days for an event you are running. The supplier’s standard terms state that they will provide products within 14 days. You and the supplier verbally agree that the supplier will deliver quicker, within seven days. However, the supplier failed to change its standard terms to note this specific deadline. If you cannot prove that your contract stipulated these bespoke payment terms, you may find proving that the supplier breached the contract far more challenging.
2. Overlooking Significant Legal Risk
Commonly, a supplier’s service agreements and terms and conditions are drafted to protect them, not their customers.
For example, a supplier’s terms are likely to include:
- onerous obligations on the customer;
- clauses heavily reduce the supplier’s liability for breaching the agreement; and
- termination rights that give the supplier the right to end the contract in various circumstances.
Such clauses could significantly reduce your remedies if the supplier breaches the terms. This could also potentially be very risky for your business plans or operations. For example, if your business relies on services from a third-party supplier, they can end the contract immediately if you fail to pay them on time.
As such, you should always read the terms and conditions to identify legal risks and make an informed decision. Understanding the risks will allow you to negotiate terms with the supplier or decide to walk away if you feel the contract is too risky for your business.
If you fail to read the terms and agree to risky clauses, your lack of unawareness will not help you if a supplier seeks to enforce its rights. As a business, you are expected to have read and understand the terms you have signed.
3. Incurring Additional Costs
As a customer, pricing is critical. You should thoroughly understand all the costs you must pay under a contract. You must read the terms and conditions to understand all payment terms, including terms allowing a supplier to charge you additional costs.
For example, a supplier’s terms may include interest provisions, allowing them to charge you interest for late payments. If you fail to read the terms and pay late, you could incur additional interest costs without realising.
Additionally, a supplier’s terms may include the right to charge for additional costs, such as expenses or to charge you for requesting changes to the products or services. If you fail to read these terms but sign the contract, you must pay these additional costs when the supplier demands them.
Therefore, you must read the terms and conditions to understand precisely how much the products or services will cost and any other costs you may be responsible for. If you are unhappy with any of the payment terms following your review you can discuss them with the supplier and try to reach a compromise position.
Use this checklist to ensure your supplier contracts contain all necessary terms.
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Failing to read a supplier’s terms and conditions could expose your business to significant risks. Not only could the terms be highly onerous and risky, but you could incur liabilities you may not be aware of. For example, the supplier’s terms might include high-interest provisions for late payments, which could be hugely costly for your business. As such, you should always read and understand the terms and conditions before signing them.
If you need help reviewing a set of terms and conditions, 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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