Business Terms

Business Terms – Not Standard At All

Whenever the economy has a dip and creditors become slower at paying, it’s a good time to dust down and review your “standard” terms of business. Insofar as these exist at all they are often cobbled together from other peoples forms or are in very basic format.

Contractual rights are the life blood of business.  It is critical that you are in a strong and competitive position in an unforgiving market place. Suitable written terms can assist in many ways including:

.   Identifying when a contract has been made and,  where goods are involved, when ownership in them passes to the buyer.  Most people do not appreciate that where goods are specific and deliverable, ownership in them passes when a contract is made – often on the sending of an e-mail or fax.

.   Preventing that ownership passing at all when monies are still owing on that particular contract or indeed under other contracts and having the right to identify and recover unpaid goods, often in an insolvency situation.

·   Specifying when you can terminate a contract rather than merely claim damages or interest.

.   Having the ability to vary the terms of a contract in certain eventualities, (especially on the price) when say there is an unexpected rise in commodity costs or currency fluctuations and being able to expressly prohibit the customer making deductions against payment.

.   Limiting or excluding your liabilities for damages arising from poor  performance,  especially in respect of indirect losses.

·    Putting the responsibility for any non-standard  technical requirements or specifications involved in the contract  firmly on the customer.

To be effective, standard terms must be successfully incorporated in the relevant contract i.e. at the time the contract is made, not on confirmation of order, delivery or(even!) at invoice.   They must also comply with a veritable raft of statute and regulations.   Exclusion clauses in particular may be void if they are unreasonable, even in dealing with a business, where there are standard contracts or warranties regarding quality or misrepresentation.  You need to evaluate your client base, the services or goods dealt with and decide what terms are both suitable for and enforceable by your business.