Are your terms and conditions (T&Cs) fit for purpose, robust and properly utilised by staff? As your business evolves, so too will your T&Cs. You can stress-test your T&Cs by asking yourself (or getting one of your team) to answer these five questions:
1. Are my T&Cs appropriate for my business?
Businesses change and the product or service you sell may evolve. You may find yourself operating in a different or wider marketplace. Your business processes may alter, for example by changes to order or delivery procedures, or even just the terminology used by the business. Mis-matches between the business and the T&Cs can create problems when you try to enforce an agreement with a customer who is in breach, creating ambiguity as to meaning. Read your T&Cs regularly and ask yourself whether they fit the profile, processes and language of your business.
2. Who are you doing business with?
Consumers? Other businesses? Where are your customers based and which legal system applies? The answers to these questions might have a significant impact on how you deal with non-payers. A common difficulty is T&Cs that incorporate the law of a state which is not best suited for enforcement against customers in breach. This can lead to the cost of enforcement being substantially higher than necessary.
3. What problems have I had in the last 12 months?
Look at your bad book. What debts have you had to write off and why? What customers did you have to take enforcement action against and what issues did they raise? Could any of your difficulties have been avoided with more detailed or different T&Cs? For example, would a clause that prevents ownership of goods transferring to the customer until all sums due to you have been paid have enabled you to recover unpaid goods or given you a better position on customer insolvency? What about a clause enabling you to draw down on customer deposits when defined default events occur? Then again, what if your problem is not in the wording of your T&Cs but in demonstrating that your T&Cs apply? That brings us neatly onto the next question…
4. Do my staff know what they are doing … and why they are doing it?
The best T&Cs in the world won’t help you take enforcement action against customers in breach if they have not been incorporated into your contract with the customer. Online sales generally require tick-box acceptance of T&Cs. However, if your sales are based on hard copy documentation, there is more room for error. Most businesses ensure that standard forms have T&Cs printed on the reverse but if staff photocopy the forms without including the reverse then you will have a problem.
Difficulties can often arise if staff do not keep copies of the documentation, giving you problems evidencing the contract when taking enforcement action through the courts. Staff who fail to respond to a customer rejecting T&Cs may not realise this could prevent you from relying on them in the event of a problem arising. These kinds of issues are the cause of a substantial number of disputes between businesses and their customers but can easily be avoided with robust processes and regular staff training.
5. Do my T&Cs make sense?
Finally, it may sound like a no-brainer but if your T&Cs don’t make sense or are ambiguous, they are aren’t going to be much use. For example, it may be unclear if a particular failing by a customer falls within a list of defined defaults that entitle you to exercise some right, such as terminating the contract or drawing down on deposits. A court will generally interpret the meaning of an unclear term against the interests of the party who imposed the term – i.e. you! It is always worth remembering that ambiguity can develop further down the line and that clauses that once made perfect sense may become unclear or irrelevant following changes to the business and its processes.
Joanna Clark is a senior sssociate in the business disputes and asset recovery division of Brodies LLP.
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