“Don’t panic… we always trade under our own terms and conditions”, or words to that effect, is something that I hear frequently from new clients as well as some existing ones.
Sadly, however, it often isn’t correct and in the world of commerce, where almost every relationship that you have with another business has a contractual element to it, your own terms and conditions really matter.
What are Standard Terms and Conditions?
A business’s own terms and conditions, usually entitled something like ‘standard terms and conditions of sale [or purchase]’ is its ‘small print’. It’s the elements of the contract that you always want to apply to the transaction you are about to enter into, but that you don’t want to be having to discuss and separately document each and every time you do your business.
For example, if you are buying goods or materials for onward sale or for use in your business then you want to try and ensure that if there is problem with them, or they are delivered late, then not only can you get your money back but that you can also claim for any loss and expense that you suffer. If you are a seller of goods you will want to try and ensure the opposite applies and that you have contractually agreed to exclude, or at least limit, loss that you might cause to a buyer.
Terms and Conditions in contracts can protect your business
If you are a business that does not have standard terms and conditions then you really should be addressing this as they can provide you with some protection if things go wrong and a dispute arises and you are financially exposed.
However, be careful because simply having your own standard terms and conditions does not mean that every time you buy or sell something (i.e. you enter into contractual relations with another party) your standard terms and conditions will apply. And that, sadly, is the mistake that I come across quite frequently with businesses when a dispute has arisen.
When your standard Terms and Conditions might not cover you
The main reason why a business’s standard terms and conditions might not apply is because they have not been incorporated as terms into the particular contract in question. This may sound strange if a party has standard terms and conditions, however, to incorporate them into the particular contract in issue the law expects you to have drawn your standard terms and conditions to the attention of the party that you are doing business with and that they are to apply to the contract.
However, this does not mean that you are expected to have discussed those standard terms and conditions with the other party.
Two things you must do to try and incorporate your Terms and Conditions to protect you
You are expected to make the other party aware that:
- You have standard terms and conditions of purchase/sale by referring to this clearly on the face of your key contractual documents (e.g. purchase orders, order acknowledgment forms, etc) and that the sale or purchase is subject to them (to the exclusion of any other party’s); and,
- If the standard terms and conditions are not contained on the document (often a business may include a full copy printed on the back of the particular contractual document) letting the other party know where they can easily access a copy of them (e.g. making a clear reference to a website address where a copy can be easily viewed).
What happens if the party that you are doing business with also has standard Terms and Conditions?
Even if you do the above you still need to be careful because incorporation of your standard terms and conditions can sometimes be thwarted if the other party you are doing business with also has standard terms and conditions - in this situation whose standard terms and conditions prevail?
“Battle of the forms”
The answer usually requires careful analysis of the factual position of who did what, and sent what to whom, and when? Lawyers commonly refer to the concept as ‘the battle of the forms’, when each party to a contract asserts that its own standard terms and conditions have been incorporated into the contract and prevail over the others. Often the party who managed to refer to their own standard terms and conditions last and before the contract is performed will be the winner in such situations, however, this is not always the case.
Get your paperwork organised.
It’s very important that commercial parties have standard terms and conditions that are incorporated into their contractual relations with other parties and that they can try and rely on if a dispute arises. However, it is also very important that commercial parties have an understanding of how those terms and conditions are incorporated into any contract and that they have internal processes and procedures that are followed and understood by staff to try and minimise the risk that the party they are doing business with does not thwart their incorporation.
Businesses need to ensure that they take legal advice early on in any legal dispute relating to this issue and, if they do not have standard terms and conditions, that they are seeking legal advice now to address this problem before a dispute arises.
Get in touch with James Henson and the commercial litigation team
To have an initial no obligation discussion about how we can help your business, please contact us.