Can you rely on your ‘terms of business’ to provide legal protection?

It never fails to surprise me how many small businesses appear to have been misinformed when it comes to how they use their standard terms of business. I’ve seen them printed on the reverse of an invoice, included with a delivery note, even a payment reminder.

If you have gone to the trouble of preparing standard terms and conditions for your business, it is usually because you want to cover yourself legally. Whether your business is the supply or purchase of goods or services, your terms of business should cover all the standard items which you want to include in your contracts without having to think about them each time you enter into a new agreement – matters such as order acceptance and delivery procedures, payment terms, any termination rights, limitation of liability and so on. So far so good. The problem arises in relation to when these are provided to the other party.

In order to rely on your standard terms as part of your business contracts they need to be incorporated into your contracts. The key element is that the standard terms must be incorporated into the agreement before it is concluded. That is why terms sent out only on an invoice or with a delivery note are unlikely to form part of a legally binding contract – by then the agreement has been entered into and each party will probably also have performed its obligations, to some extent at least, if not in full.

The methods for incorporating standard terms into your business contracts will vary depending on your procedures for placing and accepting orders. In an ideal world you would supply a copy to each new customer or client and ask them to accept – in writing - that those terms will apply to all contracts between you. That method assumes that you will have the time and cooperation of your customer.
In the real world you are likely to be more pressed for time and will want to conclude an agreement as quickly as possible and get on with the supply of the goods or service in question. In such circumstances you need to make sure that you bring your standard terms to the attention of your customer at an early stage in the negotiations. This can be done in various ways such as sending them out with any quotations, including them as part of any sales literature, posting them on your website or a combination of any such methods.

It is not however sufficient simply to have those terms available if your customer cannot reasonably be expected to have been aware of them and have had the chance to consider them – you should make it clear that your contracts include those terms. Again this will depend on how you accept orders or whether you allow customers to accept your quotations, but you can indicate that all your contracts are subject to your standard terms of business and indicate how those can be accessed.

Sue Mann
Commercial contracts solicitor Birmingham