Everything you need to know about Terms & Conditions

This is the first of three articles on Terms & Conditions.

Part 1 – Why do I need Terms & Conditions?

I have two aims – to de-mystify the topic, and explain the importance of getting it right. This article will focus on why you need high-quality terms & conditions, and the initial areas you should be considering. This will be followed by further articles looking at (i) typical content, and (ii) how to use terms & conditions.Terms & Conditions are often viewed as being of interest only to solicitors. “Get the solicitor to draw up some T&Cs” might sound familiar! This approach can lead to excessive cost (both time and money), and at worst can result in terms & conditions which are not fit for purpose. In my view, the first stage has to be a conversation between the solicitor and the business – to consider:

• Do you provide goods, services, or both?
• Do you sell to consumers, business-to-business, or both?
• Do you get paid up-front, or do you offer credit terms?
• Are your customers local, national or international?
• What issues are specific to your industry and business? If your business is in agriculture, are you vulnerable to crop disease? If your business is in engineering, are you beholden to the suppliers of raw materials to be able to meet your commitments? If you provide services, are these dependent on certain input or actions from your customer?
• What arrangements do you have with your suppliers? The benefit of having high-quality Terms & Conditions with your customers is reduced if you have little or no protection in your relationship with your suppliers. It is therefore usually sensible to deal with both aspects together.

There is also a need to be realistic. I spent a number of years working in-house, dealing with contracts for the sale and service of engineering equipment valued at anywhere up to £100m. For that type of transaction, it is entirely reasonable to have lengthy terms and conditions dealing with each and every eventuality. At the opposite extreme, if I buy a Twix from my local corner shop, I would be pretty unimpressed to be handed 100 pages of Terms & Conditions to read through – especially if I am hungry! This will need to be considered to ensure that appropriate terms & conditions are prepared for the nature and scale of your business.

Finally, we come to the issue of cost. I have heard many comments along the lines that “I have good relationships with my customers, so Terms & Conditions are a waste of money.” This is almost universally false logic. No matter how good your products and customer service are, no business trades in a risk-free environment. Whether it be a customer becoming insolvent (in which case a robust retention of title clause could prevent significant losses) or a customer behaving unreasonably (in which case a clear and precise warranty clause can assist in managing expectations), in almost every business a set of high-quality Terms & Conditions will recover their cost many times over. It is true that in many cases disputes and disagreements can be better handled via discussion and negotiation rather than “getting legal”; however, the knowledge that you have a strong position if things do “get legal” can significantly improve your negotiating position. It also avoids you being in an exposed position should the negotiations fail to resolve an issue.

Hopefully this article has helped to explain why you need high-quality Terms & Conditions. Next time, I will have a look at the types of content that should be included in a typical set of Terms & Conditions.