By Hazel Napier, Operations Director at BEB Consultancy (UK) Ltd.
Terms & conditions should be the first legal document every start-up puts in place when setting up a new business but often they’re not even given a thought. The focus is always on getting that first customer and making a sale but without a contract or terms & conditions, there’s a real risk of something going wrong.
Here at BEB, we see time and time again clients coming to us once they’ve already had an issue. Invoices being chased, obligations being disputed, contracts being walked away from, and dissatisfied customers doing all they can to get a refund. Without a contract or terms & conditions in place, it is difficult for a business to show what has been agreed for the price.
In our experience, start-ups either end up with nothing in place at all, or they copy someone else’s, either from a previous employer or by downloading a free template. This is dangerous – we’ve seen versions with illegal clauses, ones that are far too long and complicated and ones that are completely irrelevant!
It’s true that oral contracts are just as enforceable as written contracts, and with email trails documenting discussions and what is being agreed, there is proof of the contract, right? However, this can still create uncertainty. The legal fees could easily spiral if a lawyer has to help interpret a contractual dispute by reading through countless emails. Having one document where it is clear and well-structured is far less time consuming and there is a much better chance of problems being resolved before needing legal advice anyway.
So the benefits of having a bespoke set of terms and conditions are:
Terms and conditions set out exactly what has been agreed between the business and their customer – they should sit alongside, and tie in with, the quotation. This is what the business needs to fall back on in the event of a dispute. If it’s not written down, it is just about impossible to claim they agreed a price, or extras, or not to do something.
The biggest risks are often:
- Price & Payment – which includes having the confidence as a start-up to make sure they get paid on time by considering deposits and payments up front
- Intellectual Property – protection for what the business has created
- Liability – limiting what they are responsible for (to the extent permitted by law) – for example, if a web designer creates and hosts a website, which then goes down, are they responsible for getting it back up and running, or for the million pound order their customer could have had, if the website had been working?
- Cancellation – considering how much time the business would need to find another job to replace the cancelled one.
Terms and conditions don’t only protect the business, they also protect the customer. Many businesses aren’t aware of the need to offer consumers a 14 day cooling off period for distance selling – this could see them in a lot of trouble. Either they start work without obtaining a waiver of these rights, in which case the consumer could legally pay them nothing, or they find themselves under investigation by Trading Standards – both could be avoided with properly written ts & cs.
It’s also crucial to ensure the business understands how they can make sure their terms are legally effective and incorporated into the contract – it’s no good having a brilliant set that sit in the drawer and don’t work for them.
Clarity is key – make sure everything is in plain English. If the customer doesn’t understand what they are entering into, the business may not be able to rely on their ts & cs if an issue arises.
Terms and conditions make a company look bigger and more professional. They demonstrate that the business knows what they are doing and their customers can feel confident in entering into a contract with them. In particular, when tendering for work with larger companies, a well-drafted set of ts & cs will be needed to even get a foot in the door.
Fir more information visit BEB or call 01604 217365.