Terms and Conditions (Ts and Cs) are essential for businesses that sell goods or services. This article examines why Ts and Cs are crucial, the common issues they address, their application, and typical legal concerns that may arise

Why use business Terms and Conditions?

Businesses use Ts and Cs for several main reasons

• to provide a consistent set of contract terms which apply across all business dealings.  This also helps to ensure that the business’s preferred legal terms will apply to all of its contractual arrangements
• to bring efficiency to the sales process.  With standard Ts and Cs readily available, businesses can quickly finalise transactions without having to draft new contracts and terms

• to avoid or minimise negotiations over contract terms.  By presenting clear, non-negotiable terms at the outset, businesses can prevent lengthy discussions that could delay the contract process
• to ensure that the business’s Ts and Cs apply rather than those of the other party

Businesses use Terms and Conditions to ensure consistent contract terms across all dealings, applying their preferred legal terms. Additionally, clear, non-negotiable Ts and Cs help avoid lengthy negotiations and ensure that the business's terms take precedence over those of the other party

Key issues addressed in Ts and Cs

Terms and Conditions vary depending on the type of business and the nature of goods and services provided.  However, there are several common areas which are typically addressed in Ts and Cs.

• contract formation: how the contract between the parties will be formed, including incorporating the Ts and Cs into the contract to the exclusion of any other terms
• goods or services provided: a description of the goods or services to be provided, including specifications for goods and service deliverables
• price and payment terms: the price for the goods or services, including timing of invoicing and payment terms
• delivery and performance: how the goods or services will be delivered or performed, including delivery and acceptance of goods and timetable for service deliverables
• ownership and risk: for goods, when will ownership and risk pass to the buyer, often subject to payment in full being received
• warranties: contractual promises about the nature, standard and suitability of the goods or services 
• liability limitations and exclusions: limits and exclusions on the seller’s liability for the goods or services being provided
• intellectual property rights: whether and, if so, when will ownership in any intellectual property rights which are developed in the course of the business dealing pass to the buyer
• data and privacy: provisions for how relevant personal data will be processed and stored in compliance with data protection laws
• force majeure: events outside a party’s control (such as natural disasters and other unforeseen events) which excuse a party from contractual performance for the duration of the event
• termination: how the contract can be terminated and by whom, including notice periods and events which may trigger termination, such as material breach and insolvency
• governing law and dispute resolution: the governing law of the contract and how disputes will be resolved.  This may include a mediation process prior to determination either through the courts or arbitration 

Applying Terms and Conditions

Ts and Cs will only apply if they have been properly incorporated into the contract.  Incorporation into the contract means that the Ts and Cs have been provided to the other party before the contract was entered into and the other party has accepted them (or will be treated as having done so).

Incorporation can be achieved in various ways, depending on the circumstances.

• both parties signing a contract which either sets out the Ts and Cs or which refers to them and where they have been provided or can be located
• expressly stating in contractual negotiations and discussions that the Ts and Cs will apply to the contract
• referring to the Ts and Cs in contract related documentation and literature, for instance in sales literature and catalogues or sales quotations, on order forms or purchase order confirmations or a website link from which they can be downloaded

The “battle of the forms”?

A common issue arises called the “battle of the forms”, where both parties to the contract seek to impose their own Ts and Cs 

For instance, this could happen where a seller sends a sales quotation along with its Ts and Cs to a buyer of goods and the buyer accepts the sales quotation but sends its own Ts and Cs to the seller at the same time.  A dispute subsequently arises and, as each set of Ts and Cs deals with the disputed matter in a different way, the question is which Ts and Cs apply to the contract.=

The answer will generally depend on when the contract was concluded and whose Ts and Cs had been incorporated into the contract at that point.  Often this will be the party which last put forward its Ts and Cs (assuming the other party had not expressly rejected them)

Implied terms

In addition to express terms contained in the Ts and Cs, contracts may also include “Implied terms”.  These are provisions which will be assumed to be part of the contract due to various reasons, including:

• statute – for example, the Sale of Goods Act 1979 in the case of a B2B sale of goods 
• custom or usage, including the custom or usage of a particular trade
• previous contracts and dealings between the same parties
• terms implied to reflect the parties’ intentions but which they did not expressly include

For Ts and Cs for the sale of goods or the supply of services on a B2B basis, terms implied by statute are particularly relevant:

• in the case of the sale of goods, the Sale of Goods Act 1979
• in the case of the supply of services, the Supply of Goods and Services Act 1982
• in both cases, the Unfair Contract Terms Act 1977

Terms will be implied by these statutes into B2B contracts for the sale of goods or the supply of services (including into Ts and Cs).  The statutes also provide where (if at all) these implied terms can be excluded or limited by express terms

Limitation and exclusion clauses

A party to a contract may seek to limit or exclude its liability for breaching the agreement or avoid the application of implied terms by including express exclusion or liability limitation clauses in the contract.  However, the effectiveness of these clauses is governed by various legal rules derived from both caselaw and statute.  These rules must be considered to ensure that the clause is validly included in the contract, will be properly interpreted in the event of a dispute and is not prohibited or restricted by law

For an exclusion or limitation clause to be enforceable, it must be properly incorporated into the contract.  Where the contract takes the form of Ts and Cs, these terms (including any exclusion or limitation clause) must have been fairly and reasonably brought to the other party’s attention.  An unusual exclusion clause may not be valid if it has not been given particular prominence.=

Moreover, the clause must clearly cover the liability in question and there may be statutory limitations on its scope and enforceability

in the case of B2B contracts to which the Unfair Contract Terms Act 1977 applies:

• clauses that seek to exclude or restrict liability for death or personal injury resulting from negligence will be invalid
• other liability resulting from negligence (property damage or financial loss) can only be limited if the clause meets the “UCTA test of reasonableness”
• the contract cannot exclude certain terms implied by the Sale of Goods Act 1979
• other terms implied by the Sale of Goods Act 1979 can be restricted if the clause satisfies the UCTA test of reasonableness

Where parties are contracting on the basis of one party’s Ts and Cs, that party cannot:

• include a term which excludes or restricts its liability for breach of contract or
• by relying on that term, assert the right to deliver a contractual performance which is substantially different from what was reasonably expected or to render no performance at all in respect of all or part of its contractual obligations,

unless the contract terms satisfy the UCTA test of reasonableness  

The “UCTA test of reasonableness” considers facts such as whether the non-breaching party knew or should have known about the clause’s existence and extent, taking into account matters such as trade customs and previous dealings between the parties

Conclusion

By understanding the key issues covered by Ts and Cs, the importance of their proper incorporation and legal matters such as implied terms and exclusion clauses, businesses can develop better commercial relationships.  This knowledge also enables them to protect themselves effectively in their commercial dealings

PaperRock Ts and Cs

PaperRock’s selection of Standard Terms and Conditions includes Ts and Cs for both goods and services, together with alternative versions of the services Ts and Cs drafted more for the benefit of either the supplier or the client