What’s the most important part of your terms of business? (spoiler: it’s not what you think)

January 25, 2023

What’s the most important part of your terms of business? (spoiler: it’s not what you think)

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By Siobhan Williams

So what is the most important part of your terms of business? The price and payment terms? The scope of the warranties? The limitation of your liability?

None of the above.

Whilst your terms of business can protect your business risk, they will be of no benefit to you unless they are properly incorporated into your contract with your customer.

In an ideal world, your terms and conditions will be signed off by your customer to evidence that they agree to those terms. This is easiest to achieve where you are entering into a bespoke contract with them, or where you are selling online and your customer has ticked a box to say they have read and accept your terms and conditions (providing that the full terms have been made available to the customer to read beforehand).

More often than not, you will seek to rely on your standard terms of business, but they will not be signed off by the customer. In fact, your customer might be looking to rely on their own standard terms of purchase.

Here are some quick tips to keep in mind when contracting on your standard terms:

1. Have they been made available to the customer? Ideally, they will be sent to them (perhaps with or appended to the purchase order). You could make them available on your website, however you will need to ensure that the customer’s attention is drawn to a prominent link to the terms.
2. Even if your customer isn’t signing the terms, ask them to confirm that they are agreeing to your terms of business by email.
3. Monitor the communications between you and your customer. Under the general rule of the “Battle of the Forms”, where both you and your customer want to contract on your own standard terms, the last shot wins the day. For example, if you send a quotation with your standard terms, and the customer responds with a purchase order with their own terms attached, then technically the customer would not be accepting your offer under your quotation, and would in fact be making a counter-offer. If you accept that purchase order, you will be deemed to be contracting on their terms. So, keep a watchful eye on your communications, and if your customer attempts to sneak their terms and conditions in, make sure you go back to them and confirm that you will only trade on your own business terms.

If you need any advice with navigating any of the issues raised above, please contact Siobhan Williams on swilliams@darwingray.com / 02920 829 118 for a free initial chat to see how we can help you.