Why are Terms and Conditions so valuable?

30 March 2021

When you’re running a business, whether it’s selling goods or providing services to consumers or businesses, it is often the case that the priorities rest with growth of the business and such growth is not associated with getting legal documents in place. Given the tumultuous times which we are living in there is no better time to ensure that your business and its interests are protected. The best way to do this is by ensuring that you have certainty in your terms and how you contract with your customers and clients.

Having in place written terms provides certainty and clarity to both of the parties to the contract. Without formal terms being in place the parties will rely on the parties’ understanding of emails, phone calls or discussions. Where there is anything which is not discussed in this process then this will be left to the common law. Both of these factors lead to a lack of certainty or clarity which a prudent business will want to rely upon.

With this certainty between the parties we have found that having terms in place dramatically reduces the scope for a dispute to arise with your clients or customers. If a small issue were to arise then the terms can often be referred back to, to efficiently settle such issue. Without terms, and in the worst case, a small issue can lead to a lengthy and costly legal battle. Having terms in place are a far cheaper way of settling any dispute than in court.

As part of the certainty this isn’t just in relation to the costs of the goods or services, when delivery or performance is to take place and how payment is dealt but covers other, very important, areas such as limiting your liability or exposure, planning ahead for force majeure events (such as acts of God or pandemics) and protecting your brand/ intellectual property.

It may be that your terms and conditions address particular compliance issues and set out the standards both parties are expected to meet. These may be arising from requirements from the law, such as data protection and the UK GDPR, or alternatively it may be as a result of your industries standards, such as food standards.

Depending on the business there will also be an almost infinite amount of bespoke or specialist requirements of clauses you want to include to ensure your business and its interests are protected. There are too many to list them all but some examples may relate to confidentiality, clauses to prevent poaching of employees, minimum order levels or cancellation provisions.

One element that is not often discussed when it comes to terms becomes apparent when preparing for the sale of the business. When a business is being sold one of the core elements which a prudent buyer would be looking at is the terms and conditions, such as what liabilities are they exposed or guarded from, but even more importantly whether the terms allow for the contract to transition to the buyer; in the situation where the contract cannot be moved, or ‘assigned’, or the buyer cannot continue relying on the contract the value of the business being purchased will diminish. To read more about the methods of selling your business please read more here.

As we have set out there are many reasons for ensuring that you have terms in place, varying from simplifying and clarifying the contract to the more particular requirements that you may want to protect the business. To ensure that the terms that you have in place best protect the business would be to ensure that they are carefully crafted with your business and your business practices solely in mind because no two businesses are the same. Due to the uniqueness of each and every business there is no ‘one size fits all’ or ‘standard template’ terms that can be used to capture your business in a perfect manner.

To ensure that your business is captured in this way it would be best to get in touch with us and arrange a free, initial discussion. Please feel free to give me a call on 01273 447 071 or email at [email protected].

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