Posted on: 13 November 2019
Getting your contracts right
A contract is there to protect both you and your customers as you go about your business transactions, whether this is business to business (B2B) or business to consumer (B2C). The size of your business and the industry that you work in are unlikely to be a factor when it comes to your contracts, so will be based on the terms of your business trade. A thorough contract will protect the rights of your company, look to limit liabilities and offer security for you and your customers. A contract should be comprehensive and well-defined to assure that all parties fulfil their duties, whether this is B2B or B2C.
All of your contracts should be thoroughly backed by terms and conditions. You should never rely on verbal agreements, as they could be either misconstrued by either party or disregarded in a dispute as there is no evidence that they ever existed. Verbal agreements should always be put into writing as part of a contract.
Read on to see how you can establish terms and conditions in your business contracts to ensure safety and fairness for both your business and your customers.
Drafting a bespoke set of conditions for each party that you enter into a contract with is essential to be able to provide your customers with the service that they need. However, you can create a template that can be the basis for all of your contracts. This will save time and then all you need to do is fill in the bespoke parts.
Include these 10 different terms and conditions in your contract as a starting point:
- Description of goods or services: Give your business customer as much information about the product or service that you are offering to them. This will give them a clear indication of what they are to expect from you.
- Price of your goods or services: As well as being clear about the cost of your actual product or service, make sure that you make any additional postage or VAT costs clear.
- Type of payment: Specify how you want your business customers to pay you. You could have a regular bank transaction or use a different secure online service.
- Date of payment: Let your business customers know when you expect your fee to be paid. This could be a certain amount of time following the transaction or immediately.
- Delivery of goods or services: Whether you are providing a physical product or a digital service, you should outline when your business customer can expect to receive what they have paid for. Make sure that this is a realistic period of time so that you won’t be in breach of your contract.
- What to do for goods that breach contract terms: Make sure your business customer knows about their right in regards to a refund policy, such as the amount of time that they have to report that their product is faulty.
- Factors out of your control: You may be unable to complete certain contractual obligations in the event of an unforeseen circumstance, such as a natural disaster. Outline to your business customers what will happen in the event that something like this happens.
- Product recovery: Ensure that your business customers know what will happen if they don’t pay for their product or service, including repossessing the product. Whilst a service is impossible to recover once completed, outline that action can still be taken to recover the cost.
- Limit of liability: Specify the fixed amount that the supplier is liable for in the event that the provided goods are in some way damaged or defective. Generally, this reflects the value of the goods.
- Termination of contract: There may be some occasions when a contract may be cancelled, such as the insolvency of either party. Make sure that you clearly outline the reasons why a contract may be cancelled in your terms and conditions and the obligations of both parties in such an event.
The terms and conditions of a B2C contract is different to a B2B one because you will be required to abide by the 2015 Consumer Rights Act. The act is designed to give consumers more comprehensive protection when buying goods or services.
To comply with the act, you have to make sure that all terms and conditions are clearly outlined in the contract, whether they have already been included verbally, in a sales script, digital displays or promotions. Terms and conditions cannot be hidden, which includes the small print of any contract.
All terms and conditions in the contract should be considered fair to both parties who enter into the contract. The act outlines that the contract is unfair if there is a “significant imbalance in the rights and obligations outlined in the contract”, which would be any clause which gives your business an advantage over the customer.
Use these tips to make sure that your terms and conditions are fair for both your business and your customers:
- Write your terms in clear and concise language and try to avoid using small print which customers could miss. If any terms could be considered disadvantageous for your customers, highlight them in plain view.
- Specify contractual details, such as prices, payments or delivery so that they are clearly outlined in your terms.
- As outlined above, make sure your terms do not give your business an unfair advantage over your customers.
- Include that the legal rights of your customers, as outlined in the 2015 Consumer Rights Act, are protected within your terms and conditions.
- Customers must be able to see the terms and conditions before they agree to them so if they are hosted online ensure that they are signposted
Drafting a contract can be difficult, even after following some of the advice above, so it may be worth having a legal professional to take a look over your documents to ensure that they are comprehensive and compliant with the 2015 Consumer Rights Act.
Best practices for drafting a contract
Whatever contract you are drafting follow these tips:
- Try not to use legal jargon that’s difficult to understand.
- Learn about the business that you are working with and add terms and conditions to the contract that will help them achieve their goals.
- Build a relationship with your customer so that any future contract processes can be streamlined, which will be beneficial for both parties.
- Keep the contract well organised with bullet points or numbering.
- Include images, graphs or charts where appropriate which may help both parties to understand the contract from a more visual point of view.
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Source – Zywave inc – Risk Insights – Drafting Terms and Conditions
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The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Insight Hub.