Do I Need Terms of Business?

Business Terms. Terms of trading. Terms and conditions. Terms of Business. They go by various names but essentially, are all the same thing. Here, we’ll call them Terms of Business (TOB). A written record and framework setting out the legal basis upon which businesses trade with their customers or clients. They are used to protect intellectual property rights, limit or exclude liability and establish a contractual framework governing the business relationship.

Do you really need them? No. There is no legal requirement for TOB. However, it is very strongly recommended that you have a set of standard terms drafted professionally and tailored to your business and sector to rely on, should a ‘wheel come off’ or the contractual relationship falters for any reason. It is a very modest investment that could save a lot of money and, just as importantly, your valuable time, later.

 

What should be included in my TOB?

Your TOB should provide clarity over every potential situation that may arise in the course of you doing business. There can be very specialised content dependent up on the sector you operate in but at the most basic level most TOB contain:

  • A clear explanation of the services or goods you provide;
  • Relevant timelines for delivery of your products/services;
  • Payment terms, including when payment falls due and details of what interest will accrue on late payment;
  • Relevant guarantees or warranties;
  • What action can be taken if the parties do not perform the contract – that is you do not deliver; or the customer does not pay promptly;
  • The procedure if either party wants to end the relationship and details of any notice period or fees for doing so; and
  • The relevant laws governing the transaction.

Why don’t I just use someone else’s TOB I’ve seen and like the look of; or one of those free online templates?

It may seem tempting to avoid the cost of professionally drafting your TOB by simply copying someone else’s or by using a free online template. Aside from potential copyright infringement as to the former, in either case it is likely to do so will not cover important issues relevant to your business. There is no ‘one size fits all’ model with TOB and even businesses within the same industry will not always operate in exactly the same way.

Your specific business objectives are key considerations in creating a clear, strong, enforceable set of terms. As to clarity and enforceability, dependent upon your sector and typical customer profile, it may be preferable to avoid technical jargon and acronyms that your customers may not otherwise understand. Content which is deemed to be too technical may impact its enforceability.

 

Will my TOB be legally binding?

Yes – so long as they are accepted before you begin to provide services. They should be clearly presented – say by an attachment to an email when it is agreed that you will engage with the customer or client. There should be no case to be made to suggest the customer was not previously aware of the TOB. For example, if your TOB are only hidden away on a webpage that is difficult to navigate to (and there is no record of a specific express communication from you so navigating the customer to them) that is unsatisfactory.

Once you are putting your TOB into action, beware what is known as ‘the battle of the forms’ or ‘last shot’ doctrine. This arises when two businesses are negotiating the terms of a contract and each party wants to contract on the basis of its own terms. It occurs when A offers to buy goods from B on its (A’s) standard terms and B purports to accept the offer on the basis of its own standard terms. In this situation, the battle is often won by the party who fired the “last shot”, that is, the last party to put forward TOB that were not explicitly rejected by the recipient. Such TOB may be on the reverse of a purchase order or order acknowledgement form or electronic equivalents. However, every case turns on its facts and it should be noted that the Court of Appeal relatively recently concluded that, although unusual, the ‘last shot’ doctrine was displaced on the facts (TRW Ltd v Panasonic Industry Europe Gmbh (2021)) and the ‘first shot’ won. That said, the general rule is the one to observe.

 

At Mattersmith we can prepare you clear, concise and effective Terms of Business at a cost that may pleasantly surprise you and which will put you in the strongest position to carry out your business. Contact us to talk about your requirements: Contact – Mattersmith

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