Standard terms and conditions (“T&Cs”) allow a business to apply a fairly sophisticated set of contractual terms to its customer contracts, without having to incur the time and expense of instructing a solicitor to draw up a bespoke contract for every transaction, which is a good thing…..apparently.
These T&Cs are usually quite favourably drafted, setting out the parties’ rights and obligations and limiting the supplier’s liability where appropriate. They also allow a business to standardise its contracting procedures and help contracts to be agreed upon without serious negotiation or the input of senior or legally trained personnel.
However, there are risks inherent in the use of standard T&Cs.
- They must be incorporated into the contract with the customer to be legally binding, ie the customer must be deemed to have agreed to them.
- Their terms might conflict with what has been specifically agreed in negotiations between the parties.
- They may not always be appropriate, for example, for unusually high-value contracts, or where the nature of the supply is outside the normal course of business. Here, a bespoke contract drawn up for the purpose, and expressly agreed by both parties, may be more appropriate.
- They may be out of date, referring to old legislation or regulatory requirements.
Are they legally binding?
- As a contract law fundamental, T&Cs need to be ‘incorporated’ into the contract to be legally binding. This does not always mean that the terms need necessarily be signed by every customer, and it can be enough that they are sent to a customer and referred to as part of the ordering process. But if these terms are not effectively incorporated, you won’t be able to rely upon them.
- Companies really should have effective procedures in place to ensure that T&Cs are sent out at the right time and evidence retained that they were brought to the customer’s attention. Documents that incorporate standard T&Cs cannot assist in later disputes if they cannot be identified as forming part of the contract.
- You should also watch out for a customer’s T&Cs, provoking a ‘battle of the forms’. This is when a customer produces their own set of T&Cs and seeks to incorporate them into the contract, to the exclusion of your T&Cs. You need to be wary of this happening, and always take appropriate action, as otherwise you may be stuck with the customer’s terms, which you can guarantee will be less favourable than your own.
Training
- The best advice we can usually give clients is to ensure that their sales and contract teams are fully aware of what is in their own T&Cs and to expressly refer to them on their quotes and in their negotiations with customers. They should not deviate from the standard terms in their discussions with customers, and any deviations specifically required by a customer should be referred to senior management/legal teams for consideration.
- For contracts of an unusual nature, or perhaps over a certain value. there should be procedures in place to refer the contract to the legal team for review.
Review
- You should review your T&Cs regularly, both from a commercial perspective and from a legal perspective. Not only will laws change over time, so will how you do business, and what is perceived to be the norm or acceptable in contracts and T&Cs.
- If there are certain clauses causing an issue on a regular basis in your discussions with customers, it may be appropriate to amend the problematic clause in your T&Cs to something more acceptable. This should be reviewed with your legal team.
To discuss T&Cs, you can contact Paul Lupton or Ines Ouadah in the Commercial Team at Gorvins Solicitors.