Doing Business on Your Terms

Alan Massenhove of Sykes Anderson LLP Solicitors gives advice on how to make sure your standard terms and conditions of business are incorporated into the agreement between you and your customers.

The Problem

Businesses often give their standard terms and conditions of business (T&C’s) low priority until a dispute arises by which time it may be too late. It is not uncommon for a sales department to issue quotations or accept orders using either terms that are out of date, copied from the internet or even be conducting business on the customer’s terms because the customer has successfully substituted their own T&C’s for yours.

Incorporation of Terms

T&C’s will be useless unless proper procedures are followed to ensure they are incorporated and prevail over any competing T&C’s. They will not bind your customers unless they have been incorporated.

The common law rule is that after a contract has been formed by offer and acceptance between the parties, new contract terms cannot be introduced (unless by mutual consent). Therefore the all too frequent business practice of sellers seeking to impose their T&C’s by printing them on the back of their invoices will not be sufficient to incorporate their T&C’s into the contract, as invoices are traditionally despatched after the contract has been made.

What if your T&C’s are not incorporated?

Clearly there is some form of agreement between you and your customer. If a Court does not accept that the transaction was conducted on your T&C’s (and there are no other express terms – see ‘battle of the forms’ below), it will imply terms into the agreement on the basis of an inference that the parties must have intended such terms to be incorporated. They will do this where:-

• it is necessary to give business efficacy to the contract so that even though the terms seem complete, there is something without which the contract will not be able to work in the way it was intended (for example, you sell apples to a bakery and they pay you an agreed sum. There would be an implied term that the apples not be rotten);

• the implied term represents an obvious (but unexpressed) intention of the parties. Courts will be slow to imply terms where two commercially mature parties have entered into a detailed written contract but will be more forgiving where there are no written terms at all (for example, where the Court is not satisfied that your T&C’s have been incorporated but that your customer is not relying on theirs);

• it is implied through custom. There must be an invariable, certain and general custom of a particular trade or place; or

• it is implied through a previous course of dealing. Where you and your customer have dealt with each other previously on similar contracts and consistently gone about things in a certain way, the Court will be prepared to imply a term relating to that previous course of dealings if there is no express term in the current contract.

It is, of course, far better to be able to rely on your T&C’s rather than having to waste the time and expense of trying to persuade a Court to imply a term into the agreement between you and your customer. You will be able to put far more into your T&C’s than a Court would ever imply.

Battle of the Forms

While seller’s T&C’s are more usual, it is not uncommon to see customers trying to do business on their T&C’s. If both parties try to force the transaction to occur on their terms, difficulties arise in deciding which ones prevail. In practice, it is usually the last set of T&C’s sent between the parties before acceptance or performance that will prevail.

Practical Tips to make sure you do business on your terms

• Ensure your T&C’s are brought to your customer’s attention at the earliest opportunity. Consider setting out your terms in your brochures, catalogues or other marketing material, on your quotation forms and on your acknowledgement of order.

• Put your T&C’s on your invoices – if there is a course of dealing, this will assist your argument that your T&C’s had been brought to your customer’s attention over time.

• Train your sales staff in your procedures, ensure they have at least a basic working knowledge of the rules of contract formation (offer and acceptance) and the ‘battle of the forms’.

• Get your T&C’s in first and last!

The scope of this article is limited to give guidance to enable you to do business on the basis of your T&C’s. However, those terms may still be unenforceable and in breach of statute, for example if you try to limit your liability for personal injury or death. There are also different considerations to take into account if your customers are other businesses rather than individuals. It is important that you draft your T&C’s carefully to ensure they are enforceable, as well as ensuring they are incorporated so that you can safely rely on them in the case of a dispute.

Alan Massenhove is head of Litigation & Dispute Resolution at Sykes Anderson.

Please note that this area of the law is a complex subject and you should not take or refrain from taking any step without full legal advice on your particular circumstances. The content of this article is of a general nature and no liability is accepted in connection with it or if any reliance is placed on it.