No matter what stage a business is currently at, a business owner needs to understand the reasons for establishing terms and conditions and how they assist a business in its day-to-day dealings.
How do terms and conditions work?
Terms and conditions (sometimes referred to as “terms of trade” or “T&C’s”) act as a legally binding agreement that can protect you and your business when engaging with customers or clients.
Terms and conditions can also ensure that customers or clients are aware of their obligations and give them confidence that your business will perform its duties appropriately.
Are terms and conditions necessary?
While terms and conditions are not legally required, they are an essential tool a business can use as protection if things go wrong.
For example, they can act as insurance, allowing you to recover costs or withhold delivery of goods if a customer does not pay their owed amounts by a specific time.
If your business does not have terms and conditions – or if your current terms and conditions are inadequate – your business could be at risk of losing monetary or physical assets with each transaction with a customer or client. Your business may also be at risk of being held liable for any claims made against it.
Where to start?
While every business is different, most will have terms and conditions that include certain standard clauses.
Some examples of such clauses include:
- The terms of payment for goods or services, such as the timeframes and methods of payment. Terms should also include the process if a customer does not pay on time; such a process could include ceasing work for the customer until the due amount is paid.
- Releases and indemnities of liability to protect the business. However, these cannot negate the functions of Australian Consumer Law.
- Confidentiality and intellectual property; such clauses ensure that a customer or client is prohibited from using a business’ product design or sharing confidential information with other parties.
- Terms of delivery, such as who pays for delivery costs, who is liable if items are damaged during delivery, and at what point in time does the customer own the goods (e.g. upon receiving the goods or at the time of payment).
- Events of force majeure. These clauses protect businesses if they fail to perform any duties due to circumstances out of their control, such as natural disasters or pandemic-related government directions.
Our top tips when preparing your terms and conditions
- Ensure your terms are clear, with no ambiguity as to their meaning. For example, “as soon as reasonably practicable” can be considered ambiguous; you should include specific timeframes for obligations.
- Ensure that every new customer or client is made aware of your terms and conditions; it is not necessary that they sign it, but it is important that they have been given a reasonable opportunity to read them. For example, you can attach your terms and conditions to each quote you provide for a client and encourage the client to read them.
- Endeavour to create one set of terms and conditions that can apply to any customer. This can save you time as you will not need to draft a new agreement for every customer.
We are here to help you and your business. If you require any assistance with drafting your terms and conditions or if you need legal advice, please do not hesitate to contact our team.