| Terms and
conditions of trade are vital for establishing your rights
as a supplier. They can also be a good negotiating tool.
Your terms and conditions (Ts & Cs) can establish when
a customer has to pay you and set out what steps you will
take if a customer goes out of business before paying you.
Drawing attention to them at an early stage in your dealings
with a customer is professional rather than pushy. Terms and
conditions are, however, only valid if your customer accepts
them before the sale has been agreed, so it is not enough
simply to print them on the back of your invoice. Print your
Ts & Cs on every estimate, quotation and order.
What to put in your Ts & Cs
Here are some suggestions of what you might include:
Application
State clearly that your terms will apply to any contract
you enter. Some buyers may want to impose their own terms,
in which case it is down to negotiation which terms you will
both accept.
Quotations
State that any quotations apply for a fixed period, such
as one month, in case your costs rise or circumstances change.
Delivery
If appropriate, specify delivery place and times, but state
that delivery times are approximate if they are outside your
control. Indicate when goods will have been deemed delivered
e.g. when handed to carriers. Finally, state whether delivery
costs, including couriers and insurance, are included or extra.
Retention of title
If you are selling goods on credit, specify that property
in the goods will not pass to the customer until you have
received payment in full. This ‘retention of title’
clause might help you to recover the goods if the customer
goes out of business before paying for them.
You could also stipulate that, in seeking to exercise your
rights under this clause, you may enter the customer’s
premises and remove your goods at any reasonable time.
Copyright
Where selling a creative service, specify that the copyright
and other intellectual property rights deriving from the service
remain with you, unless agreed with the customer in writing.
VAT
If you are VAT-registered, state whether VAT is applicable
and whether it is included in the price or extra.
Payment method
Choose a method that guarantees payment as far as possible.
Examples are cash on delivery or cheque backed by a guarantee
card. Accepting credit card payments costs a small fee but
reduces credit risks and collection costs, provided the transaction
is approved by the card company.
Credit terms
Before offering credit, consider what it will cost you in
terms of the interest lost on funds tied up, the time involved
in chasing payment and the risk of default. To avoid these
potential costs, you could offer a discount for payment on
delivery. Some firms insist on this, especially for new customers.
If you decide to offer credit, you could ask for payment,
say seven, 14 or 30 days after delivery of the goods or services,
or from the date of the invoice.
You might also reserve the right to add interest to any bills
that are not paid within the stipulated credit term.
Cancellation
It is sometimes useful to have a clause allowing you to suspend
or cancel deliveries and/or work if any payment is not made
on its due date. You could extend this to apply if payment
becomes outstanding on any previous orders from the customer.
You might also want to state that orders, once placed by the
customer, cannot be cancelled, nor may products be returned
for credit without your written approval.
Defects
You may not wish to raise the suggestion of possible problems
with the quality of your services or goods at the outset.
On the other hand, it is worth putting details of how you
address this in your Ts & Cs, if only to show you are
a responsible supplier. For example, you could give specific
warranties or guarantees. But do not make promises that you
cannot realistically meet.
The law implies that your services will be provided with
reasonable skill and care, and that your goods will be of
satisfactory quality and fit for purpose. Any exclusion clauses
in your terms and conditions or clauses limiting liability
are subject to the Unfair Contract Terms Act and the Unfair
Terms in Consumer Contracts Regulations. This means that liability
clauses have to be reasonable.
Force majeure
This is a clause that releases you from all liability to
the customer if performance of the contract is delayed or
prevented by any cause beyond your control.
Disputes
It is important to state whose law applies should a dispute
arise between you and your customer under your terms and conditions.
This is particularly so when trading abroad.
Once you have drawn up Ts & Cs that are appropriate to
your business, get a solicitor to check them out. Then ensure
your customers agree to them, and ideally sign them, when
placing an order.
Legal advice
This guide contains general information only. Terms and conditions
are a complex part of commercial law and you should seek legal
advice from a commercial solicitor about the terms and conditions
you have drawn up.
Using Ts & Cs in negotiations
Ts & Cs can be a powerful negotiating tool. It is generally
more convenient to have standard terms and conditions, but
being prepared to amend them can be helpful in negotiations.
For instance, if your customers want a discount and your
Ts & Cs state payment must be made within 30 days, you
could offer a small discount for payment within seven days.
Alternatively, your customer may want to pay you after their
customer has paid them. So you could suggest extended payment
terms of strictly 60 days if they collect the goods from your
depot. Be sure to state that payment to you will then be due
regardless of whether they have been paid. This is particularly
important if you are a subcontractor, where the ultimate customer
might end up disputing payment with your customer for reasons
that are nothing to do with you.
Always trade concessions, never give them away. ‘Buy’
time to think. So use a calculator to work out how a proposal
will affect you, and then make a counter offer. Do this with
the simple formula, ‘If you do this, I will do that’.
Be realistic with your own demands or concessions.
Use positive language for terms that are non-negotiable.
For example, say, ‘Our payment terms are 30 days,’
and go on to the next point. If you say, ‘Our normal
payment terms are 30 days’, it might sound as if you
are inviting your customer to start negotiating.
7 tips to help you stay in control
- Put the Ts & Cs in writing and get them signed. Have
a clause at the bottom of your order form such as, ‘I
have read your terms and conditions and hereby accept them’.
Terms agreed afterwards will not form part of the contract
unless agreed by the other party.
- Be sure that all the terms are clear. Can someone read
and fully understand the deal without needing to ask further
questions?
- Make sure each party is making a clear commitment to pay
money or carry out some action. This is an essential part
of a contract.
- All people concerned must understand and accept that the
deal is to be legally binding and under which jurisdiction
it falls.
- Check that the person you are dealing with is empowered
to enter into this particular contract. In most businesses,
only certain people are allowed to sign on behalf of the
business.
- Don’t be frightened by larger customers. They will
be bound by the terms of the agreed Ts & Cs as much
as you. Don’t feel you have to accept all their terms
and conditions.
- Finally, if a customer refuses to accept any of your Ts
& Cs, consider why not. If they are, in effect, saying
‘I can’t meet your reasonable terms,’
do you really want to do business with them? Is it worth
the risk? The bigger the order, the bigger the risk.
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