It is not a legal requirement for any business to have terms and conditions in place, yet it is strongly advised for several reasons. Properly drafted terms and condition can protect you from:
- Late payments
- Misuse of your intellectual property
- Failure to meet project deadlines
- Failure to supply work
As well as a range of other potential disputes.
Small business owners are more likely to draft their own terms and conditions. However, this is a contract and, as such, it should be written in a way that will stand up to scrutiny if needed.
Primarily, your terms and conditions should be used to avoid any dispute leading to legal action. If a customer or client has agreed to your terms and conditions then they are highly unlikely to break this contract. Therefore, even if the one party is displeased with the outcome of a disagreement, usually they will consider it unwise to challenge this legally. Unless, of course, they believe that the contract will be disregarded in a legal dispute.
Terms and conditions may be disregarded for several reasons. Some of which may seem immaterial. However, it is important to recognise that a legal contract is not necessarily binding unless a court agrees that it is.
So, are your terms and conditions worth the paper they’re written on?
Here, we’ll go through some of the common mistakes business owners make in their terms and conditions and how to avoid them. It may be useful to check your contract as we go through these points. If at any point you’re not confident you cannot check a box then it may be worth seeking legal advice. LegalDrop’s legal advisor comparison site enables you to compare and be put in touch with the right advisor for your business requirements. You can find out more about help with drafting terms and conditions here.
7 Mistakes Business Owners Make In Their Terms And Conditions
1. Complicating The Language
The thought of writing a legal document can be daunting. As such, many business owners fall into the trap of feeling as if they need to fill their terms and conditions with legal jargon, in order for it to sound professional. In reality, this cannot be further from the truth. Arguably, the most important thing for your terms and conditions to be is clear. Concise is also useful, though that should not deter you from including all necessary details. A properly drafted contract should have no spelling or grammatical mistakes as these can make you appear unprofessional. However, complicating the language can also put off clients, customers or partners from signing. If a contract is complex it can be a red flag and many will fear hidden clauses. Even if the other party does sign, difficult to understand content can result in the contract being declared redundant in matters of dispute.
Action Point: check your terms and conditions are clear and easy to understand
2. Be Reasonable
We’re so used to agreeing to terms and conditions that many of us don’t read them. Consider the terms you agree to whenever you purchase an app or subscription. Most of us click through without reading a single sentence. Why do we do it? Well, because we know that companies are not able to ask anything unreasonable. That’s not to say that your terms and conditions won’t be read. Especially in the case of business-to-business agreements, you should assume your T&Cs will be thoroughly looked over, possibly by an expert. However, the point is that unreasonable terms will not survive the scrutiny of a legal case.
Unreasonable terms might include:
- Tying a customer/subscriber into a lengthy contract
- A dramatic increase in cost after a certain time period
- Unrealistic time-frames (for example, for freelance projects)
- Penalising one party for breaking contract, but not the other party
Although it is impossible to state all potentially unreasonable terms, simply put, these would constitute terms that favour one party over the other. Contracts that do so may not be enforceable should a dispute arise. Furthermore, this can create tension, distrust or even end a business relationship before it has begun.
A good business person enters into partnerships and/or customer relationships with the intention of ensuring both parties benefit. Do your business terms and conditions reflect this?
Action Point: check your terms and conditions are favourable to all parties involved
3. Important Details Up Top
The purpose of terms and conditions is not to hoodwink or deceive. In fact, you want your clients/customers to read and understand your terms before agreeing to them. This ensures both parties know what to expect from one another. Therefore, it is never a good idea to bury clauses, terms and conditions in the contract. Those terms that are most important, especially if they are at all non-standard, should be right at the top of your contract.
Don’t be afraid of your client or customer being put off by these. If there is any concern, they will let you know and you will have the opportunity to negotiate or clarify. However, appearing to hide less favourable terms can be a red flag for your client/customer. Obtaining an agreement without the client fully understanding the terms will not protect your business. In fact, it is only likely to provoke the other party further, should a conflict arise.
Action Point: check your most important and potentially controversial terms are clear and on the first page (or two) of my T&Cs
4. Realistic Timescales
This clause pertains mostly to terms and conditions relating to freelance, agency or otherwise outsourced projects. Within these contract types, timescales are going to be a point of contention. Being realistic about the timescales allowed for work to be completed is essential. Unreasonable demands will render your terms and conditions unenforceable. It can also lead to a bad relationship with partners and suppliers.
When drafting terms and conditions it is important to put yourself in the place of the other party to determine if you're asking too much. However, setting unrealistic timescales is also a mistake that suppliers also make. Term and conditions should not reflect good intentions but instead, allow for some unforeseen circumstances. Although it is not possible to cover every scenario, you might want to consider how your timescales may differ if essential supplies needed to complete work do not arrive on time. Optimism has its place in business, but a bit of wriggle room may be what you need to be sure you can meet expectations. Not to mention, ensuring you’re not overextending yourself. As the popular saying goes, it is better to underpromise and overdeliver than to overpromise and underdeliver.
Action Point: check that you’re confident timescales are realistic for yourself or your client/supplier
5. Ignoring consumer protection laws
Although it is important to have terms and conditions in place, the terms you set out do not trump the legislations and laws set by the country your business is operating in.
When drafting your terms and conditions, you should refer to common legislation. For example, if the Consumer Rights Act specifies that a customer has 30 days to reject goods and your terms and conditions state that buyers of your products have only 14 days, guess which claim is enforceable? Check that your terms and conditions meet with those standardised in other legislation (including employment law) because your T&Cs are very unlikely to ever override these.
Action Point: check your terms and conditions do not conflict with general legislation
6. Overly generous payment methods and timescales
It used to be commonplace to offer up to 30 days for a customer/client to settle an invoice. However, these days there’s really no reason to be overly flexible. With instant transfer, it's far easier for clients and customers to make payments sooner.
We’re not advocating unreasonable payment demands. For a constructive working relationship, you should attempt to work with your clients’ pay run schedule. However, being overly generous on timeframes for payment after work has been delivered can put you at risk and make managing cash flow difficult for you. Prompt payment is a perfectly reasonable demand, especially if you’re sharing intellectual property or have already invested in shipping goods. Remember, if you are setting out the timeframe you expect to be paid within then your client, assuming they agree to your terms and conditions, is aware of the expectation and has deemed it acceptable.
Do not feel obliged to allow outdated terms of payment, such as cheques, as an option for your clients. You can be sure that other suppliers are not.
Action Point: check the payment options you offer work for your cashflow and are reasonable for both parties
7. Getting consent
Would you believe that one of the most common mistakes in terms and conditions is not the drafting of them but the delivery? Yes, all too often small businesses, in particular, fail to get clients/customers to officially agree to the terms and conditions.
Sending through terms and conditions can feel awkward. Especially when you might be excited about entering a partnership with optimism and enthusiasm. However, a client or customer not expecting or not amenable to agreeing to terms and conditions may be someone to reconsider working with. In all likelihood, your T&Cs will be read and agreed to without any issues at all and then that’s one less thing to worry about. Agreeing to terms and conditions actually clarifies what each party expects from your business relationship and means you enter into it having both resolved to minimise the potential of conflicts arising.
Getting consent to your terms and conditions does not require a paper copy necessarily. Parties may usually agree electronically.
Action Point: check you have a system in place that ensures clients/customers agree to your terms and conditions prior to work commencing/receiving goods
Do you need your Terms & Conditions drafted or checked over?
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*The contents of this document do not constitute legal advice and are provided for general information purposes only.