Why does a business need to specify Terms and Conditions?

Holmes & Hills commercial solicitors highlight the need for a business to ensure they have clear Terms and Conditions set out.

What are Terms and Conditions?

Terms and Conditions (T&Cs) set out the rights and responsibilities of both a business and the customers / suppliers / third parties that the business is contracting with. T&Cs usually contain provisions including payment, liability, and service standards, and can be completely tailored to fit your needs.

Although it is not a legal requirement for a business to specify its T&Cs, it is, in most circumstances, recommended, for the following reasons:

1. Clarity
   Having a clear set of T&Cs provides both parties with clarity on how their relationship will be governed. It will include payment provisions, key dates, and any standards that the business and the party contracting with the business must comply with. For instance, if the business is contracting with its suppliers, it may wish to include terms within the contract relating to the quality of the goods and services supplied. If the business is providing goods and services to its customers, it could include provisions including when the ownership of the goods will transfer to the customer, any arrangements that the customer will need to comply with in order for the business to provide the services to them, and any consequences of non-payment.
   
   This will provide both parties with clarity on what is expected from them, and lead to greater understanding resulting in fewer disputes.
2. Enforceability
   Without written T&Cs, although there may be a verbal agreement, a contract by conduct, or some other arrangement in place, it could be hard to prove the terms of this arrangement, or even that this arrangement was agreed at all. Furthermore, there could be disputes surrounding whether each party’s obligations were intended to be legally binding, or disputes in relation to the jurisdiction and laws that govern this arrangement, particularly if the business is located in a different place from the other contracting party. For instance, if the business is based in England but its customer is based in Scotland.
   
   Written and agreed T&Cs will create, upon both parties, a legally binding obligation to ensure that those T&Cs are complied with, and are more likely to be enforceable than other forms of arrangement.
3. Unplanned Circumstances
   Often, if no written agreement is in place, a business and the party they are contracting with may not consider all eventualities that may take place. For instance, if a business already has in place a good relationship with its supplier, they may not consider what may happen if there is any dispute. In the same way, a business may not have considered what would happen if it could not supply goods to a customer for some reason outside of their control.
   
   A written contract will often cover these eventualities, as they will usually contain clauses including dispute resolution and force majeure, and many more. In this way, a written contract will often provide a business with cover and reduce ambiguity in these unforeseen situations.
4. Third Parties
   Third parties may need access to written terms and conditions between a business and its customers / suppliers / other contracting parties. For instance, if the business owner is looking to sell the business to another person or company, it is likely that contract disclosure will be requested as part of the due diligence process. In addition, third party lenders may require access to these terms and conditions before providing the business with finance.

If you require further information or advice in relation to what type of T&Cs may be relevant for your business, our corporate and commercial lawyers can help.