Are you using your terms and conditions effectively?

In the third part of our series of articles on ensuring your terms of business are effective, we consider the key pitfalls when seeking to ensure your terms and conditions (T&Cs) form a binding contract with your customers. In parts one and two of this series we discussed the importance of (i) ensuring that T&Cs are fit for purpose and (ii) periodically reviewing those T&Cs to ensure they are up to date. In case you missed the previous two instalments, the articles can be found here:

How effective are your Terms of Business

The importance of tailoring your terms and conditions

Issues arising with ineffective use of T&Cs

Even the most perfectly drafted T&Cs are worthless unless they form the core terms of each contract that a business enters into with its customers.  That requires a sound sales process which effectively ‘incorporates’ those terms into every deal. In today’s fast paced, often electronic, world this requires diligence.

In legal terms the matter is simple. A contract is formed when an offer is made, and another party unequivocally accepts that offer. To be effective, the T&Cs need to form part of its offer, and the other party needs to accept that offer, on those terms. In reality a number of problems can arise:

Failure to adequately communicate that the T&Cs form part of the offer

In the fast-paced world of business it is all too easy for a deal to be struck without having made it adequately clear that the business’s offer is to be expressly based on its T&Cs applying. If an offer is made without reference to the T&Cs – and it’s accepted, then a contract is formed – potentially without those T&Cs, it is too late to rectify that oversight afterwards.

A ‘battle of the forms’ arises

Another common issue is that instead of simply accepting the offer cleanly, the customer instead seeks to do so on the basis of its own T&Cs (which are likely more favourable towards their own interests). Legally speaking, the customer has not accepted the original offer, but instead made its own counteroffer and no binding agreement has been reached.

This is commonly described as a ‘battle of the forms’ and that battle only ends if and when it can be determined that an offer was finally made that was accepted. Generally speaking, it is the last set of terms that were despatched before performance that will apply to the transaction (also known as ‘the last shot fired rule’).

That last point is worth reiterating. It is possible for a business to end up transacting on a customer’s terms, rather than its own, by simply failing to spot the customer’s counteroffer, and then proceeding to perform its obligations (a deemed acceptance of the customer’s counteroffer, by way of performance).

What steps can be taken to ensure effective incorporation of your terms?

There are several steps that a business can take to ensure that its T&Cs are effectively incorporated into a commercial transaction:

• Make the T&Cs clearly visible at the earliest opportunity, and then as often as possible. In this case, the best defence is a good offence, namely clearly re-iterating the message that your business is only willing to contract on its terms.
• Train their employees – Businesses should ensure that their employees are appropriately trained on how to ensure the T&Cs are effectively incorporated, in particular those employees who play a key part of the sales process.

How can we help?

Ultimately the risks and best protections here are highly specific to each business. At Brachers, our Commercial team understand that there is not a one-size-fits-all approach to these issues and the best approach will need to be tailored to the individual business, balancing competing interests and practical constraints.  Our goal when advising on these issues is to craft a solution which is as unobtrusive as possible, while maximising its practical effectiveness.

If you are concerned that your T&Cs are not being incorporated appropriately through your sales processes, we would encourage you to get in touch. We are currently offering a health check on any business’s process for incorporating its T&Cs, for a fixed price of £1,500 plus VAT.

This content is correct at time of publication