When starting up a business, it is important to draft transparent and robust Terms and Conditions (T&Cs) that govern your commercial and contractual relationship with customers.
Although it might be tempting not to prioritise preparing a set of T&Cs, doing so could result in an increased risk to the business of misunderstandings and potential disputes arising that might otherwise have been reduced or avoided altogether.
Below we look at some of the key reasons why it is important to have well-drafted T&Cs in place, together with the possible consequences of not putting them in place when starting up a business.
Reassurance, clarity and legal certainty
Setting out clear and concise terms which have been agreed between the parties and the conditions upon which your new business agrees to proceed on, will assist in clarifying the rights and obligations of each party. This is particularly important in relation to key areas such as payment terms, the ways in which a business can seek to limit its liability and the ability of the parties to terminate a contract.
Reduce the likelihood of legal disputes
Legal disputes are not only stressful but costly and time-consuming. They also take time and energy away from focusing on the growth and success of your business, which is crucial in the start-up stages. Putting in place professionally drafted T&Cs at the outset, will reduce the risk in many cases of a dispute arising that cannot be addressed before becoming a formal legal dispute.
Customer confidence and reassurance in your business brand
Although having T&Cs in place is not a strict legal requirement, it is good business practice to do so. From a customer’s perspective, it provides a level of reassurance that the business they are dealing with takes a professional approach to its commercial engagements.
Protection of Intellectual Property Rights
For start-up businesses that are dealing with the creation of Intellectual Property for their customer, or using existing Intellectual Property to fulfil their contractual obligations, it is important to clearly set out how such Intellectual Property Rights (IPRs) are owned. With appropriately drafted T&Cs, a business will be able to clearly set out which IPRs (if any) are to be transferred or assigned over to its customers or granted under licence. T&Cs can also provide both parties with a further layer of protection in the form of indemnities, in the event IPRs used over the course of an engagement, belong to a third party that subsequently looks to bring a claim for infringement.
Required by some Insurers
Although stated earlier that there is no strict legal requirement, depending on what profession or industry a start-up business is involved in, insurers may, nevertheless, insist on the business having T&Cs in place. This is especially important if the risk of expensive claims is high.
Can we use the same T&Cs for businesses and consumers?
From a practical perspective, where possible, businesses will usually prefer to have an all-encompassing set of T&Cs when dealing with businesses as well as consumers. Whilst that’s acceptable, it is important to note that businesses and consumers are treated differently, with consumers benefiting from an extra layer of protection granted by The Consumer Rights Act 2015.
In such instances the T&Cs for your business should accurately cater for the type of customer it deals with and provide the appropriate level of protection. Failure to do so could result in the business’ T&Cs being unenforceable.
For further advice on this and other Corporate & Commercial issues, please contact Chris Brightling, Caroline Armitage, Jonathan Masucci, Elesha Bradford or Sarah Karam.
