What should your terms of business agreement cover?

Not having ‘anything in writing’ when you are selling goods or providing services is a recipe for disaster!

Having your own Terms of Business which accurately reflect how you and your business work is really worthwhile and brings many benefits. Set out below are some key pointers about ‘terms of business’ as we explain what you need to know.

Building your business on solid legal foundations is key to success, and a terms of business agreement is arguably one of the most important contracts you will use. Investing in getting them right early on can help to limit your liability, create certainty, and enhance your business’ reputation. Speak to our commercial law solicitors for support drafting, negotiating, or reviewing terms of business.

What is a terms of business agreement?

‘Terms of business’ is the name for the document in which you set out what has been agreed between you and your customer, whether it’s goods you are selling or services you are delivering.

They form the basis for your relationship with your customer.

They don’t need to be complicated or full of jargon. They need to set out what’s agreed, what you will actually do and for what and what will happen if things don’t go the way you intended.

Do I need terms of business?

If you want to conduct business – goods or services – on terms that suit you, yes, you should have them.

If you don’t have them, you have nothing in writing to fall back on, years down the line, if the relationship with your customer comes undone or things don’t work out so well as you had intended.

You run the risk of disputes dragging on for months – and costing a fortune – because you’ll be arguing about who agreed to do what in the sunny long-ago days when everyone was cooperative.

It also looks far more professional, with all that that means for your reputation, to have an accurate, reasonable and well-presented set of terms of business ready to give to your customer right from the start.

Far better to be:

• clear up-front;
• to avoid litigation;
• to come across as proactive, organised, fair and clear

Just don’t leave them at the bottom of your to-do list!

What’s included in standard terms of business?

What’s in your terms of business agreement depends on what your particular business provides but these standard terms should be included:

• Description of the goods you are selling or services you are providing.
• Price including the possibility of variation and increase and how you will tell your customer about these changes. Here’s additional info on contract clauses to increase prices.
• Payment details including how – and when – you want to be paid and what happens if there’s a delay or failure to pay.
• Delivery and insurance including when the customer becomes liable for the goods.
• Practicalities of service performance (eg. in a cleaning contract, how many staff, for how many hours and the service levels expected).
• Reps and warranties including confirmation that your customer is what/who he says he is, has authority to do business and has met all his statutory obligations.
• Liability including how far you are responsible if the goods are not up to standard or the services unsatisfactory. This clause is designed to limit the extent of your liability eg. in the event of misuse of goods by the customer or your inability to carry out the service because the office doors are locked(!).
  We cover this subject in more detail in our article, limiting the liability of your business.
• Confidentiality including the use and protection of any IP.
• Assignment to others including what happens if eg. either party is sold or whether or not the parties can assign the contract to its respective subsidiaries.
• Termination including how long the contract is to be in place, what can cause a termination, what notice is required, the effect on services not completed/goods not yet arrived and any early termination charges.
• Data Protection and other relevant statutory requirements eg. consumer rights.
• Dispute resolution process – it is far better to be clear in advance about the steps to be followed should things not work out as hoped.

When do I need a lawyer?

• When you haven’t got any terms of business and you have a customer! (You need these up and running as part of your business set-up; don’t leave it to the last minute – it looks disorganised and unprofessional, quite apart from making your lawyer’s life very challenging!).
• When you are tempted to use someone else’s standard version. Terms of business can look like standard documentation but properly-drawn they will be tailored to your specific business with your particular requirements. Someone else’s version can never provide that finer and vital detail.
• When your customer is pushing back on the Terms of Business you have already sent them and you are not sure of the implications of the changes they want.
• When you have been sent someone else’s terms of business to sign.

Our commercial law team is available to assist you with any queries that you may have in relation to terms of business and with expertise across a wide range of sectors and industries can advise you on both the legal and commercial aspects of your terms of business at every stage of your business’ lifecycle.