T's & C's - how to use them and some drafting points to consider
The correct drafting and use of Ts & Cs should be part of any business’ risk management programme for the following two reasons. Firstly, your failure to include the right terms in your Ts & Cs will leave you vulnerable, and secondly you can significantly reduce your risk of being involved in, or losing, court actions simply by laying down procedures for the use of Ts & Cs and providing training to your sales and purchase staff.
Ts & Cs set out what the parties to a contract agree will happen during the course of the contract and after something has gone wrong with it. If you are selling or buying any goods or services, you should do so on your terms if you can. Whether you are able to do so will often depend on your bargaining power, but you can also impose your own terms simply by dealing with your Ts & Cs and those of the other party in such a way that, most of the time, your own terms prevail.
Making sure your Terms and Conditions prevail
Whether or not your Ts & Cs apply to the contract is a matter of fairly complex contract law. A contract is concluded when a firm offer is unequivocally accepted. A firm offer is something more than a list of goods in a catalogue; it is usually an order or a quotation. An unequivocal acceptance is one which does not introduce new terms into the deal. If a purported acceptance introduces new terms to the deal, it is generally not an acceptance but a counter-offer, which can be accepted or rejected by the other party.
Basic rules to remember:
1. Send out your Terms and Conditions early and often
Your Ts & Cs must be communicated to the other party before the acceptance occurs. If they come afterwards, they are too late to be part of the deal. If they come along with the acceptance, the acceptance is not an acceptance but a counter-offer. Therefore, printing your Ts & Cs on order acknowledgements, invoices, and delivery notes is often not enough. They should be printed on advertising such as brochures, websites or quotations.
2. Be the last party to table your Terms and Conditions before the acceptance
The party who sent its Ts & Cs to the other party last, as long as it was before the acceptance, will usually find that its Ts & Cs prevail. If the other party sends you its Ts & Cs after you have communicated yours to it, you should not conclude the contract until you have resent yours to it, stating that the contract is on your terms. For example, if your terms were printed on your quotation, but the customer’s terms were printed on its order form, the customer’s terms prevail unless you reaffirm the fact that your terms apply when you accept the order.
3. Have a written acceptance procedure if possible
Sending customers written order acknowledgements/acceptances referring to your Ts & Cs is a good way of ensuring that your terms are the last ones to be tabled before the contract is concluded. However, if the customer has not already seen your terms, or has tabled its own terms, this is a counter-offer and you should either get the customer to agree explicitly to your terms or state on the order acknowledgement that unless you hear from the customer within, say, five days, the counter-offer will be deemed accepted. The best way of ensuring that your terms apply is to get the other party to sign a copy of your Ts & Cs signifying their acceptance of them.
4. Keep records
Keep all your letters and notes of telephone conversations; in a court case, whose terms apply is always a matter of evidence.
Establishing a process for dealing with Terms and Conditions
It is wise to establish a process for dealing with Ts & Cs. There is no set way to do this, and basically it is just a matter of collecting evidence that shows that your terms apply. The best evidence that your terms apply is a copy of your Ts & Cs which has been signed by the other party, accepting them. It is not always possible to get this, though.
Some example processes
Situation: You are the seller of goods. Your customers can see what is for sale by looking through a catalogue, and can place an order by writing to you or phoning you.
Process: You should print your Ts & Cs in the catalogue and on any order form you provide to the customer. State in the catalogue that all sales are subject to your Ts & Cs. If the customer does not use your order form to place its order, you do not have a problem unless the customer has attempted to introduce its own terms. If it has, you should not accept the order until you have told the customer your terms will apply and asked for acceptance.
Situation: You are the seller of services. Your customers request quotations, you provide the quotations, and the customers can place an order by writing to you or phoning you.
Process: You should print your Ts & Cs on any sales literature you have, and on the quotation. State on the quotation that no order submitted by the customer will be deemed to be accepted until confirmed in writing by you. On receiving an order, send the customer a written acceptance stating that your Ts & Cs apply. If the customer has introduced its own terms along with its order (or before you have sent your acceptance), you will need to ask the customer to accept this counter-offer perhaps by sending you back a slip confirming that it agrees that your terms apply.
Some drafting points to consider
When drafting Ts & Cs, the choice of terms will vary according to whether they are designed for sale or purchase, and goods or services. In many cases, there will be a mixture of goods and services being sold or purchased.
Basic terms to include govern:
- basis of the sale – a description of how acceptance occurs;
- orders and specifications;
- price of the goods/charges for the services;
- rights in input material and output material (services only);
- terms of payment;
- risk and property;
- warranties and liability;
- insolvency of buyer;
- export terms;
- termination (services only); and
- general miscellaneous terms.
The Ts & Cs should be drafted to (a) achieve what they are intended to achieve, and (b) comply with the law. Below are some of the questions which should be asked.
- Are goods manufactured to the buyer’s specification? If so, the buyer should indemnify the seller against claims for infringements of intellectual property rights.
- Are the goods produced to meet the special requirements of an individual customer? If so, the customer should not be able to cancel their order. If not, you may want to allow cancellations subject to receiving back any costs you have incurred.
- How long are quoted prices valid for? Are you able to increase prices in line with, e.g., exchange rate fluctuation?
- Do you charge for pallets or returnable containers?
- Do you have an ‘all monies’ clause? Insurers often require that you do. It enables you to retain property in the goods sold under the current contract until all monies due under the current contract ad all other contracts between the seller and the buyer have been paid in full.
- If you are the seller, have you stated that you are not liable for late delivery? If you are the buyer, have you stated that the seller is liable for late delivery?
- Have you stated that you are not liable for failure to deliver if the failure is beyond your reasonable control?
- What happens if the buyer fails to take delivery?
- Are you prepared to give any warranties? If selling to consumers you cannot exclude certain warranties implied by law.
- If you are the seller, have you limited your liability? Do your limitations and exclusions of liability comply with the Unfair Contract Terms Act 1977, which controls the extent to which liability can be limited or excluded? If not, they will not be enforceable.
- Do you sell to consumers? If so, (a) are your Ts & Cs written in plain, intelligible language, and (b) have you stated that the consumer’s statutory rights are not affected by any exclusion of warranties, conditions or other terms implied by law that you may have included in the terms?
- Do you sell to consumers over the internet? If so, your Ts & Cs must comply with the Consumer Protection (Distance Selling) Regulations 2000. Amongst other things, they must tell the consumer of its right to cancel the contract within 7 working days of receipt of the goods.
- Durable goods frequently develop problems through inherent defects, wear and tear or simply the lapse of time, whereas consumables do not have this problem. Do your Ts & Cs have to deal with both consumables and durables, or one or the other? The extent to which a customer is entitled to claim on the warranties available should correspond with the nature of the goods.
- Do you offer a repair and maintenance service?
- How long should the customer have to inspect the goods and notify you of defects or failure to correspond with their specification?
- Are your terms and conditions of sale harmonised with your terms and conditions of purchase?
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.