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Contracts are vital tools to protect suppliers of products or services from risk. Suppliers often use documents such as standard terms and conditions for customer projects. However, a customer may occasionally push back and request that a supplier sign their terms and conditions instead. This article will explore whether, as a supplier, you should sign your customer’s terms and conditions at their request.
Why Are Terms and Conditions Important?
Ensuring a robust business contract is in place is crucial for formalising the terms of any commercial arrangement between parties. For businesses engaged in trading, prioritising the creation of a comprehensive agreement to govern the sale of products or services is vital. Using a well-drafted contract will give your business a range of protection in case of unforeseen circumstances and problems.
A typical supplier business practice is to use standard terms and conditions. These terms are typically appended to an Order Form detailing the specific products or services for the customer.
Standard terms and conditions are predefined contractual terms a supplier provides to all customers rather than individually negotiated agreements. While they streamline the agreement process, customers may sometimes seek to negotiate these terms. We explore this further below.
Should I Sign My Customer’s Terms and Conditions?
There may be instances where a customer asks you to sign their terms and conditions to proceed with a project. This can be a problematic scenario for a supplier wanting to do business.
On the one hand, you will want to protect your business contractually as much as possible by using your standard terms. On the other hand, rejecting a customer’s terms could mean difficult conversations and potentially losing business.
Here are some key points to consider when met with this request:
Always Review the Proposed Terms Carefully
You must carefully review a customer’s terms and ensure you understand them. For instance, do they correctly lay out the services you will deliver, delivery timeframes, and payment terms with which you have agreed? If not, the terms will not be fit for purpose and could result in several risks for business, such as ambiguity, mismatched expectations, and the potential for disputes.
Consider the Risks
It may be tempting to either (i) sign the customer’s terms to get the deal over the line or (ii) reject them and walk away if you are unhappy with their terms. Both can have negative implications, such as several legal risks for your business and losing customers. Before taking action, carefully consider your options and the best way to proceed constructively.
Seek to Negotiate
If a customer’s terms are entirely inappropriate for your project, you should seek to negotiate them openly and constructively. For example, politely explain why specific clauses are unacceptable and require amendment.
Download this free Commercial Contracts Checklist to ensure your contracts will meet your business’ needs.
It may help to explain that changes are necessary to protect both parties, not just yourself as a supplier. For instance, you may need to build in clauses such as intellectual property rights licences to lawfully use the customer’s trademarks. Or data processing clauses to comply with the UK GDPR rules if your business will act as a data processor.
Remember key clauses to protect your business from risk, such as limitation of liability clauses. These are critical clauses for a supplier, so you should include them in your contract.
Push For Your Terms and Conditions
You may encounter a set of customer terms and conditions that are entirely unfit for purpose and would require a disproportionate amount of time or cost to renegotiate.
Consider politely declining the customer’s request and asking them to sign your terms and conditions in such a case. Be polite and explain rationally why your terms have been drafted to cover your specific services and are bespoke for the project and its particular requirements.
Seek Legal Advice
Obtaining legal advice is invaluable when dealing with customer requests, especially where their terms and conditions are not fit for purpose. Seeking the expertise of a qualified contract lawyer can prove vital in navigating such situations.
Moreover, lawyers can lead negotiations with the customers, expressing why the current contract falls short and facilitating discussions to reach a mutually beneficial resolution. With their expertise in contract drafting and negotiation, collaborating with an experienced lawyer can help ensure swift resolution to such contractual dilemmas.
In summary, a service supplier must consider several factors when a customer asks them to sign their terms and conditions. Working with a lawyer can help you navigate the best approach, depending on the circumstances, customer, project, and bargaining power.
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Key Takeaways
Act cautiously if a customer asks you to sign their terms and conditions. Always review the terms to check if they are fit for purpose and ensure that you understand the risks involved. Do not be hesitant to push back and negotiate the terms if necessary. Consider seeking legal advice for invaluable support – an experienced lawyer can help you understand the risks of using a customer’s terms and help negotiate a resolution on your behalf.
If your business needs help negotiating 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 who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
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