It really is good practice to have in place a set of Terms and Conditions which you provide to your customer explaining the terms which apply when they purchase goods or services from you.
In the absence of published terms then the law will imply terms to the contract which may or may not work in your favour. If you expect to be paid within a certain period you need to set this out in your Terms and Conditions otherwise the law will imply when payment will be made which may not fit with your cashflow!
Set out below are the essential points which you should cover in your terms:
1. Who is the contract between? If you are providing goods or services yourself to the customer then the terms should state that the contract is between your business and the customer. The name and address of your business along with the legal status (e.g. sole trader, partnership) should be specified. The customer should also be identified as far as possible by referring, for example, to the customer as the person who has ordered the goods or services. If you are acting as an agent, a booking agent as an example, the contract will be between the entity you are acting as agent for, such as the event organiser, and the customer. If this is the case then it needs to be stated clearly.
2. Ordering & Delivery – the process for ordering the goods or services and the delivery arrangements should all be set out clearly. If you have a particular process which you want your customers to follow then this should be explained.
3. Price & Payment – the terms should either specify the price or refer to a quotation or price list. Set out when you want to be paid and the payment method. Phrases like "we would prefer payment to be made before we deliver your goods" should be avoided. Be clear when you want to be paid!
4. Late payment charges – it is a good idea to protect your business and incentivise your customers to pay on time. This can either be a flat fee for each day the payment is overdue or calculated as interest on the amount due from the due date until you receive payment. Remember though that the late payment fee needs to be a reasonable assessment of your loss (not a profit opportunity!) otherwise it could be unenforceable.
5. Cancellations & Returns – state your cancellation policy and how returns work. If you are selling over the internet you will probably be subject to the Consumer Protection (Distance Selling) Regulations 2000 which apply to most goods and services. Other regulations may also apply to your business for example, The Cancellation of Contracts Made in a Persons Home or Place of Work Regulations 2008. A good source for information on this subject is The Office of Fair Trading website – www.oft.gov.uk.
6. Ownership – if you are selling goods it is always advisable to state that the goods will continue to be owned by you until you have received payment in full. This gives you the right to re-possess the goods in a worst case scenario where the customer cannot or will not pay.
7. Limit your liability – it is possible to limit your liability to the customer to the cost of the goods or services provided should anything go wrong. Liability cannot be excluded or limited where you have caused death or personal injury to someone.
8. Complaints – details of how the customer can contact you in the event of a complaint should be set out.
9. Which law applies? – It is particularly important to state which law applies when you are dealing either over the internet or outside of England. If you want English law to apply and the courts in England to decide a dispute then you need to say this.
© 2011 Mairéad Mckenna
Mairéad McKenna is the founder of McKenna Hughes Ltd which provides legal support to SMEs. She has more than 20 years experience as a lawyer representing both large and small businesses.
Mairaead Mckenna
McKenna Hughes Ltd
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