Terms & Conditions Part 1 - Why Do I Need Terms & Conditions?

Euan McLaughlin, (pictured) a partner at Sills & Betteridge and a member of our Corporate & Commercial Team, has written a series of three articles telling you everything you need to know about Terms & Conditions. In this first article, Euan explains why you need them.

I have two aims – to de-mystify the topic, and explain the importance of getting it right. This article will focus on the outline of why you need high-quality terms & conditions, and the initial areas you should be considering. This will be followed by further articles looking at (i) typical content, and (ii) how to use terms & conditions.

Terms & conditions are often viewed as being of interest only to solicitors. “Get the solicitor to draw up some T&Cs” might sound familiar! This approach can lead to excessive cost (both time and money), and at worst can result in terms & conditions which are not fit for purpose. In my view, the first stage has to be a conversation between the solicitor and the business – to consider:

• Do you provide goods, services, or both?
• Do you sell to consumers, business-to-business, or both?
• Do you get paid up-front, or do you offer credit terms?
• Are your customers local, national or international?
• What issues are specific to your industry and business? If your business is in agriculture, are you vulnerable to crop disease? If your business is in engineering, are you beholden to the suppliers of raw materials to be able to meet your commitments? If you provide services, are these dependent on certain input or actions from your customer?
• What arrangements do you have with your suppliers? The benefit of having high-quality terms & conditions with your customers is reduced if you have little or no protection in your relationship with your suppliers. It is therefore usually sensible to deal with both aspects together.

There is also a need to be realistic. I spent a number of years working in-house, dealing with contracts for the sale and service of engineering equipment valued at anywhere up to £100m. For that type of transaction, it is entirely reasonable to have lengthy terms & conditions dealing with each and every eventuality. At the opposite extreme, if I buy a Twix from my local corner shop, I would be pretty unimpressed to be handed 100 pages of terms & conditions to read through – especially if I am hungry! This will need to be considered to ensure that appropriate terms & conditions are prepared for the nature and scale of your business.

Finally, we come to the issue of cost. I have heard many comments along the lines that “I have good relationships with my customers, so terms & conditions are a waste of money.” This is almost universally false logic. No matter how good your products and customer service are, no business trades in a risk-free environment. Whether it be a customer becoming insolvent (in which case a robust retention of title clause could prevent significant losses) or a customer behaving unreasonably (in which case a clear and precise warranty clause can assist in managing expectations), in almost every business a set of high-quality terms & conditions will recover their cost many times over. It is true that in many cases disputes and disagreements can be better handled via discussion and negotiation rather than “getting legal”; however, the knowledge that you have a strong position if things do “get legal” can significantly improve your negotiating position. It also avoids you being in an exposed position should the negotiations fail to resolve an issue.

Hopefully this article has helped to explain why you need high-quality terms & conditions. Next time, I will have a look at the types of content that should be included in a typical set of terms & conditions.

Euan McLaughlin joined Sills & Betteridge in 2009, qualifying as a solicitor in 2011. He is originally from Boston but is now based at our Lincoln office. Euan has extensive experience of advising on and negotiating all kinds of commercial agreements, from standard terms to large-scale individual contracts. To contact Euan, please call 01522 542211 or click here to view his profile on our site.

The corporate department at Sills & Betteridge has an experienced team of lawyers who are committed to assisting our clients with the full range of legal services required by businesses. Our expertise with both large and small enterprises, from owner-managed businesses to listed companies, means that we can tailor our legal advice to your specific needs and offer you the most appropriate, efficient and cost-effective solutions. We are able to offer advice on commercial law to clients at a local, national, and international level. To find out more about our corporate and commercial services, please visit https://www.sillslegal.co.uk/corporate-sale-purchase/