The 5 things you need to consider when drafting or updating your Terms & Conditions
Olivia Parkinson, trainee solicitor in Frettens Corporate & Commercial Team, breaks down the 5 most important things you need to consider when drafting or updating your business’ terms and conditions.
Why are terms and conditions important?
A well drafted set of terms and conditions (“T&Cs”) is crucial for any business, in that it makes customers aware of the details of their legal relationship with the business they are engaging with and, in turn, reduces the scope for potential disputes arising in the future.
It is often the case that when a conflict arises, it comes to light that a business does not have any T&Cs, or at least its current version is not up to date, and this can lead to unnecessary, and costly, litigation. We would therefore always recommend that T&Cs stay at the forefront of any business owner’s mind.
What should be included in terms and conditions?
There are several points to consider when drafting or updating existing T&Cs –
1. Obligations of parties
A business should be clear in its T&Cs what it expects from its customers, and what the customers can expect in return. A key purpose of T&Cs is to establish the commercial terms being offered to customers and allows contracting parties to understand their rights and responsibilities.
Setting out responsibilities allows businesses to effectively manage its client’s expectations and avoid any ambiguity around what is expected of them.
2. Credit terms and non-payment
T&Cs should clearly outline the payment terms for the customer and what the ramifications are if any payments are missed. A poorly drafted payment clause may leave businesses unable to recover unpaid debts.
Businesses should also reserve the right to charge interest on any late payment. This could be at a rate chosen by the business, for example, a certain percentage above a bank base rate, or the business could charge interest in accordance with the Late Payment of Commercial Debts (Interest) Act 1998 (and subsequent 2002 Regulations), which currently sets the rate at 8% pa. Note that if a business has quoted a lower interest rate in its T&Cs, the lower rate will take precedence.
Businesses should also consider whether or not it would be relevant to include a retention of title clause in their T&Cs.
Click here to read the rest of the points that need to be considered when drafting up T&Cs.