What are terms and conditions?

Terms and conditions are essentially a contract upon which people you do business with agree to. It is common for a business to have a standard set of terms and conditions, which are not intended to be varied.

Why use standard terms and conditions?

The main advantage of having a standard set of terms and conditions upon which you conduct your business is that if a dispute arises in the future there is a clear agreement between the parties which can be referred to which shows what the parties agreed upon.

A standard document saves time and money in drawing up a different agreement each time you do business with someone. Sometimes it is not appropriate to use standard terms and conditions but many companies will find that they supply the same goods or services the majority of the time and a standard set of terms and conditions works for them.

Standard terms and conditions provide certainty to your business in that transactions are conducted on similar terms at all times. This is good for risk management purposes and ensures everyone in the business knows, for example, when debt monies owed to the company is due and what can be done in the event of non payment.

Care must be taken to ensure that the terms and conditions, whilst favourable to your business, are not too fierce to scare off business.

What do terms and conditions usually cover?

Most business terms and conditions will cover a number of issues such as:

• A description of the goods or services supplied and description of quality. Whilst being reasonable this could mean the difference between having to refund someone for a very minor defect in a product or not.

• The price to be paid for the goods or services and by what date. This provides certainty as to the agreed price and when you are to be paid.

• Delivery of performance time limits. This provides certainty for both parties as to when they can expect goods to be delivered or services to be performed by.

• Details of when the ownership and risk of any goods passes to the other party. You are able to retain ownership of the goods until payment has been received in full even where goods have been delivered.

• Provisions can be included to protect intellectual property rights that may be valuable to your business or provide that your “trade secrets” must be kept confidential. For example you may have a product which is uniquely valuable and if copied could cause you loss of profit.

• To a certain extent your liability can be limited by using effective clauses.

• Termination provisions can be included so that you have an “exit” if necessary. For example you may want to be able to terminate a contract if the other party has recently been made bankrupt, as they may not have the funds to pay for your business.