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As a supplier of products or services, you likely work with several different types of customers. When doing so, you can ask customers to sign standard terms and conditions to protect your business. However, customers may want to negotiate changes to your standard terms from time to time. This article will explore some best practice suggestions regarding whether you should agree to vary your standard terms and conditions.
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Why Use Standard Terms?
When delivering products or services to customers, contractual terms are crucial. As a supplier, a robust contract to govern the sale of your products or services can:
- give you certainty about your obligations; and
- help protect you when things go wrong.
Standard terms and conditions are legal terms included in your business contract. Often, a business will issue standard terms and conditions to all customers. Using standard terms can offer a speedy approach to agreeing on a contract by saving you the time you would otherwise spend negotiating a bespoke contract.
Commercial Considerations When Varying Standard Terms and Conditions
Standard terms and conditions are usually non-negotiable. In other words, suppliers tend to offer their services on a ‘take it or leave it’ basis. However, customers may try to negotiate your standard terms to protect their business interests. We explain three critical legal issues to consider when a customer asks you to vary your standard terms and conditions:
1. Risk Exposure
There are several reasons why a customer may ask to vary your standard terms. For example, the customer may have bespoke requirements not covered in your standard terms. In this case, they may request specific changes to your standard terms accordingly.
The customer might also want to negotiate specific changes to some commercial terms. For example, they may request a more extended period to pay you. Alternatively, they may request a notice period to terminate the agreement. Sometimes, the customer may request a limitation of liability clause, which limits their liability if they breach the contract.
In any event, you should consider the associated risks for your business when a customer requests changes to your standard terms and conditions. It may be that some of the customer’s requests are legitimate and reflect reasonable changes to the contract terms, in which case you should consider accepting them.
You must take time to understand all the requested amendments to your original contract terms and the implications. For example, if the customer requests changes to your obligations under the contract – will you be able to fulfil them? Ultimately, you should be comfortable with the changes proposed before accepting what the customer requests.
2. Negotiation
Lawyers often draft standard terms and conditions heavily in favour of the supplier rather than to protect both parties. Naturally, customers will try to negotiate terms and conditions to protect themselves. As a result, you should take a pragmatic view of negotiations. Whilst legal terms are critical, it is also important to show customers you can compromise and accommodate their requests where possible.
If the customer also has a legal team, engaging lawyers can help speed up the negotiation process. A lawyer can also help quickly prepare revised terms for the customer’s approval based on your agreed changes. This can help you reach an agreement with the customer more efficiently and finalise the contract terms to each party’s satisfaction.
3. Loss of Business
In today’s business world, customers have significant bargaining power and tend to shop around. A customer will be looking for a supplier with whom they can build good long-term working relationships.
Being reasonable and open to negotiations to your terms and conditions may make you more likely to win more business. Successful negotiations can build trust with potential customers and show them you are willing to compromise. If you refuse to accept negotiations with a customer, they may decide not to sign your contract and go elsewhere.
Therefore, keeping an open mind and accommodating customer requests where possible may help you secure more business in the long term.
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Key Takeaways
A savvy customer will likely review and amend your standard terms and conditions. If this happens, it is best practice to be open and work with the customer to reach a compromise. Nevertheless, you should consider the implications and risks around the customer’s requests and approach the negotiation discussions accordingly. You can take legal advice if you are unsure about whether a customer’s requests are reasonable or risky. Be aware that if you outright reject all negotiations to your standard terms and conditions, the customer may feel uncomfortable doing business with you.
If you need help negotiating contract terms and conditions or advice on the legal risks associated with contract changes proposed by customers, 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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