Terms and Conditions of Business – Why do businesses need them?

Let’s start with looking at what is meant by terms of business.

The terms and conditions outline the contract between you and your customer for your supply of goods or services. This also regulates your business relationship.

The purpose of setting out terms and conditions is to record what you have agreed and to layout the inflexible terms under which you will accept business.

Businesses focus on generating clients and selling goods or services and without a contract or terms and conditions of business, it will be difficult for businesses to clearly show what they have agreed to provide and what isn’t included in their charges.

The terms will:

  • Define the contract between both parties;
  • Set out your business procedures;
  • Limit your liability; and
  • Protect your business and your rights

Payment upfront

You still need terms of business, which acts as a contract between you and your customer/client.

Litigation

All businesses want to avoid litigation as it is stressful, expensive and damaging to your business. Terms and conditions help to avoid litigation as they should set out clearly the contract between the business and your customer/client.

Outlining the Agreement

The contract is a written agreement between two parties and details the terms of a transaction. The contract states the work that will be performed, along with important information like due dates and costs. It is better to keep the contract as simple as possible. 

  • State the full scope of works;
  • Outline a general timeline if possible and if possible exact due dates for each milestone. This isn’t always possible if waiting on a third party;
  • Everything discussed should be included in the contract;
  • Payment amounts and terms. State how many days will the person have to pay the invoice and whether it is to be paid before or after work commences and payment method. Is there interest charged on late payments;
  • Outline the circumstances under which the contract can be terminated and how that will be handled. If dispute mediation becomes necessary, the contract should also outline how that will take place;
  • If necessary, one or both parties may choose to include a noncompete or nondisclosure clause; and
  • State terms related to failed obligations. If, for instance, payment isn’t remitted by a certain date, the contract should outline what late payment fee will apply and any interest charges.

Protecting both business and client

Having clear expectations in a contract makes enforceability easier. Knowing that the terms of business are in writing can put pressure on all involved parties to meet their obligations on time. The service provider will probably even routinely check the contract to make sure the work is progressing as agreed.

If an issue arises, having the agreement in writing will make enforcement much easier. If the client decides to work with a different agency halfway through the project, the provider could take legal action to be paid for work performed.

Financial Agreements

The contract will ensure the service provider receives payment in a timely manner. For big projects, this generally means multiple small payments as certain milestones are reached. Payments can be asked for in stages.

A written contract may not always be enough to get paid on time. It is essential to issue invoices and reiterate the terms on that invoice. Give your clients/customers different options to make payments.

Closing the Contract

No business wants to proceed with legal action but the contract between both parties lays out exact terms and conditions for that service or purchase. The contract should be kept for 6 years after closure in case a later issue should arise.

Keeping a template that you can adjust based on lessons learned from previous business transactions is a good idea.

© Karen Wells Avalon Legal 2020

Contact:

Phone:  020 8644 4441
Mobile:  07506 583669
​Email:   info@avalonlegal.org

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