If you are in business and contracting with others, you need to make sure that you are protected. Your terms and conditions are the cornerstone of your business and we would caution in the strongest possible terms against copying from a website of a competitor, or ‘cobbling together’ from a selection of others that you have ‘played about with’. They need to be designed with your particular business, otherwise you may not be protected.
Your terms and conditions govern the contracts you have with your customers. If you have nothing in place, then the level of protection given by statute is very limited and makes litigation, if it is necessary, more uncertain.
Putting in place effective terms can also make a big difference to your bottom line and your day to day cash flow. Charging interest on overdue debts is just one example of the issues your terms should regulate, for instance, it can make the difference between the statutory rate of 8% per annum and a more commercially realistic interest rate specific to your business. In effect, you could be bank rolling your customers business, as it may well be that an interest rate of 8% is a far more generous credit rate to your customers than the rate your customer’s bank is offering in respect of their overdraft facility. The reality is, you may be using your credit and cash flow to fund your customers business.
Your terms and conditions should provide interest rates at a level that is not inherently unfair but high enough to deter your customers from thinking you are an easier option than their own facilities.
Putting your own terms and conditions in place is not enough in itself – they actually need to apply to your contracts. Where many businesses fall down is by not legally incorporating their terms and conditions into the contract. Simply stating your 14 day payment terms or your 18% interest rate for overdue monies on your invoice is too late. All your terms and conditions need to be communicated to your customers at or ideally before the contract is formed. For example, they should be placed on your website for your customers to access and additionally, when your client places an order with you, an order confirmation attaching those terms and conditions should be sent to them. Only then can a solicitor pursue, for example any personalised interest rate.
It is vital to have your terms and conditions drawn-up professionally and, if in doubt, take some advice to ensure they will cover a number of scenarios to ensure maximum protection for you and your business.
For further information, please contact Kaye Whitby in the commercial team on 0844 391 5830.