Standard Terms and Conditions and the key to their incorporation
Whether your business provides goods or services, it is important to have a robust set of terms and conditions, which set out the framework for how trading is conducted and ensures uniformity across all contractual relationships.
Standard terms and conditions should set out the key contractual terms, such as your procedure for payment of bills or invoices; how deliveries are to operate and when risk passes; if your business owns any intellectual property rights, how those may be defined and used; and, how the contract may be terminated.
Once you have a strong set of standard terms and conditions, it is imperative to consider whether these have been properly incorporated into each and every agreement that your business enters into, to ensure that the terms and conditions can be enforced.
Joe Creasor, solicitor in the Company Commercial team at Wake Smith looks at the details.
This article covers:
- Advantages and disadvantages of standard terms and conditions
- Ensuring standard terms and conditions are incorporated into new agreements
- ‘Battle of the forms’
- Your next move
Advantages and disadvantages of standard terms and conditions
It is important to consider the advantages and disadvantages of having a set of standard terms of conditions for your business.
Although there are obvious key benefits to having bespoke terms and conditions there are a number of other factors you should consider too.
Advantages:
You are able to introduce favourable terms that complement your business with little to no negotiation with a third party required. This can be useful, for example, if trading with a company in a foreign jurisdiction when considering governing law provisions or when risk passes on the delivery of your goods.
- Standard terms and conditions enable you to trade on consistent terms across all agreements. This can ensure a good knowledge of your agreements by key personnel enabling them to identify breaches at an early stage.
- The use of a standardised agreement can reduce cost and time involved in drafting new bespoke agreements for each contract entered into. Additionally, more junior members of your management team are able to take control of entering into such agreements without fear of losing control of the overall structure of the agreement.
Disadvantages:
- There are certain provisions under the Unfair Contract Terms Act 1977 which limit the enforceability of standard terms, for example any increase in charges may be subject to a reasonable test.
- As discussed below, in respect of battle of the forms, it is important to ensure the standard terms are effectively incorporated into any new agreement.
- The nature of your business may require bespoke commercial terms for each contractual relationship.
Ensuring standard terms and conditions are incorporated into new agreements.
Having taken the decision to have a set of standard terms and conditions it is important to ensure they are incorporated into all agreements your business enters into.
Although this may seem an obvious point, general terms and conditions can easily be omitted if you do not have the correct practices and procedures in place to ensure their inclusion, as their mere existence does not automatically incorporate those terms into your contractual agreements.
If you enter into agreements without reference to the standard terms, they cannot retrospectively (without express consent of the other contracting party) form part of the agreement.
To ensure your terms are incorporated into each and every new agreement, it is best practice to have a copy printed on the back of any document issued to the customer, including, in particular, on any order forms, and to have their existence clearly referenced, stating something such as “subject to those standard terms and conditions found on the reverse side of this agreement…”.
If your business has a website, it is advisable to keep a copy of the standard terms on your website. A live link can then be added to an email footer incorporating standard terms into any pre-contractual discussions by reference in the email.
Ensuring pre-contract negotiations are subject to contract, and ensuring no open offers are made, will help minimise the risk of having your standard terms excluded from the resulting agreement.
’Battle of the Forms’
If you are in negotiations with another business and each of you wishes for the agreement to be on their own standard terms you will find yourself in a ‘battle of the forms’.
Usually, in a situation such as this, the last party to propose terms, which are not rejected by the recipient, will succeed.
This legal principle of ‘Battle of the Forms’, however, can be avoided with the use of careful drafting, as seen in a recent case of TRW Ltd v Panasonic Industry Europe GmbH [2021] EWHC 19 (TCC).
In this case, Panasonic requested all new clients sign a customer file which was accompanied with their general conditions.
The general conditions expressly stated that it applied exclusively to the entire business relationship between the parties, unless the Panasonic agreed otherwise in writing, and that any conditions of the buyer that diverged from the general conditions would be invalid even if Panasonic effected delivery of the goods without reservation.
The careful drafting in the Panasonic case ensured even when TRW sent a purchase request with it owns standard terms the battle of the form’s doctrine was dis-applied.
Your next move?
Wake Smith’s company commercial team can help your business determine and set out the correct terms and conditions.
For further information please contact Joe Creasor at Wake Smith Solicitors on 0114 224 2188 or email [email protected]
