Many businesses engaged in the sale and purchase of goods or services operate using a standard set of Terms and Conditions. These Terms and Conditions attempt to set the terms for all contracts your business enters into. It is important to regularly review them to ensure they reflect your current business practices and that they are legally effective.
From a practical perspective having clear Terms and Conditions will be beneficial to both parties as they will set out provisions relating to the delivery of the goods, the price to be paid and the circumstances in which the contract can be terminated, which ensures that both parties know what is expected of them and helps to resolve disputes.
It is necessary to consider whether certain clauses included in your Terms and Conditions are legally enforceable. For instance including a limitation of liability is always desirable, but the law does place limits on what can be excluded. If your limitation clause goes too far you risk the entire clause being ineffective. You should also consider whether there are provisions to deal with a situation where the other party enters into insolvency proceedings as it will usually be appropriate to include a right to terminate the contract in such circumstance.
A major problem that can occur is where both parties to a transaction have their own standard Terms and Conditions. If a dispute arises, it is not always clear whose Terms and Conditions should prevail, this is known as a ‘battle of the forms’. The courts will often look at the behaviour of each party and analyse the transaction in order to decide which party made the offer to contract and which party accepted the offer. The most common result is that the first party that begins to perform their obligations under the contract is said to have accepted the offer made by the other party when they last put forward their Terms and Conditions.
Such analysis does not always produce a result, if no clear offer and acceptance can be found the courts may decide that some other terms should apply (such as the terms implied by the Sales of Goods Act) or that there is no contract at all. These results are not useful to either party. It is therefore important that your Terms and Conditions set out very clearly that a certain step in the transaction is an offer to contract on your Terms and Conditions and that the next step is the other party’s acceptance of that offer. You must then ensure that you enter into transactions in a manner which concurs with this and that you send your Terms and Conditions to the other party before you perform your obligations under the Terms and Conditions.