When faced with a contractual dispute, can you rely on your terms and conditions? Do you even have terms and conditions when doing business with others? Here's a reminder to all companies to have the right process in place.
Small businesses often trade without terms and conditions or a formal contract in place which leaves them in a vulnerable positions if things go wrong.
Trading on a verbal agreement isn't enough. Can you remember what was agreed and more importantly prove it if things go wrong? The terms need to be in writing and properly drafted as two companies recently found out.
A dispute over terms and conditions arose between Transformers & Rectifiers Ltd and Needs Ltd so they went to Court. Both companies lost out because, even though they had terms and conditions in place, neither company made enough effort to communicate them to the other side.
Needs Ltd argued that its terms and conditions applied to the sale of the gaskets, so that its liability for breach was limited to the contract sum, but Transformers & Rectifiers Ltd said that its terms and conditions applied because they were printed on the back of the purchase order.
The commercial relationship had been going on for more than 20 years. Orders were placed for the gaskets and other components every week by fax, email and sometimes by post. What was important was that the terms were printed in a pale typeface on the reverse of the purchase order with no reference to them on the face of the purchase order. When the orders were faxed or emailed, the reverse side was not included in the transmission.
Similarly, Needs Ltd referred to their standard terms and conditions in their order acknowledgement, but did not provide a copy or print them on the reverse.
As a result, both companies failed to have their terms and conditions upheld in declining the contract, with the High Court saying that neither party's terms and conditions were sufficiently incorporated into the purchase process.
This highlights the importance of making sure that if you want to be able to rely on your terms, then you must state clearly that you are purchasing or providing the goods or services on your terms.
The terms can provide certainty and clarity on what the goods/services are, how much wil be paid and when, what happens if something goes wrong and who is liable.
Also, the terms need to be supplied each time or readily available – these days it could simply be a link to a document on your website. So, for example, the order acknowledgement could say "Oue standard terms of business shall apply, click here to read our standard terms". This important things is to be clear and consistent.
