‘How to make the most of your terms of business and avoid the common pitfalls’

A Presentation for the Farnham Hub by Josie Appleyard of Mackrell Turner Garrett Solicitors

13 March 2015

A little about me

• Specialist in Company and Business Law and Employment matters

• With Mackrell Turner Garrett for 10 years

• Qualified as a Solicitor for 8 years

• VIP member of the Farnham Hub

Today’s talk

•Many businesses have no written terms of business or do not properly incorporate terms into each contract they make.

• How many businesses here today have:-

• No terms of business?• Have not updated their terms within the last few years?• Did not get advice when drafting their terms?• Used a competitors terms?

Objectives of this Presentation

• Reasons why terms are so important

• An understanding as to how to ensure your terms of business are incorporated into any transaction with customers and clients;

• What should be included in your terms of business;

• An brief understanding of the additional rules and considerations when dealing with “consumers”; and

• The common pitfalls.

Why are terms of business so important?

• Every new order is a contract.

• If there are no terms, or inadequate terms, law operates to imply terms.

• Implied terms are often unclear and ambiguous and may not provide sufficient protection.

• The parties will often have very different ideas as to what was agreed

• This uncertainty can lead to costly litigation unless settled

Incorporating terms into the contract

• It is not enough to have terms in place; they must be incorporated into the contract before the contract is concluded

• Reasonable notice of terms must be given before the contract is concluded

Some examples as to how to incorporate your terms

• Signature

• Generally, if standard terms are set out or expressly referred to in a contract that both parties sign, it can be assumed that the standard terms are incorporated.

Some examples as to how to incorporate your terms

• Incorporation by reference

• Expressly state in pre-contract correspondence that your business’ standard terms will apply to the sale

• Bring the terms to the attention of the customer in as much documentation as possible before the contract is concluded.

• Be careful on relying on terms printed on invoices.

• Website sales: - a notice immediately below where customer fills in its order and a hyperlink to your terms.

Some examples of how to incorporate your terms

• Course of dealings

• Can be useful if you have difficulty in showing terms have been incorporated

• Courts have held that terms are incorporated where they have been used in previous transaction between the parties. • Require regular trading • Require consistent trading

• Last resort due to uncertainty

Common Pitfalls

• If printing standard terms on reverse of document ensure:-

• Statement on front of document to highlight terms

• If unusual or onerous term, particular attention must be drawn to the term on the front of the document

• If terms on reverse govern or vary something on the face of the document, e.g. price or delivery date it should be cross-referenced

Battle of the Forms

• Usually only relevant when dealing with other businesses

• Traditional legal principle as to when a contract is formed; offer made by one party which is unequivocally accepted by the other party in words or by conduct.

• General principle – last set of terms produced wins due to introduction of a counter offer

Battle of the forms – drafting and procedural tactics

• Include or refer to standard terms in as many pre-contractual documents as possible

• Include a statement in your terms stipulating that your terms will prevail over any terms issued by the other party. Beware! This may have little effect legally but it is often used as a bluffing technique

• Beware! Contracts can be made orally, they do not have to be in writing. Ensure any discussions over the telephone or face to face are expressed to be on the basis of your standard terms or are stated to be subject to contract (i.e discussions not binding until a written contract is entered into)

Battle of the forms – drafting and procedural tactics• Make sure any pre-contract documents (i.e. quotations and

brochures) are stated not to constitute offers.

• Require customers to submit a written purchase order which you can accept by issuing an acknowledgment stating a contract has come into existence on your standard terms.

• Standard order form for use by customers that sets out your standard terms or states that any order is an offer on your standard terms and send your terms to the customer in the latter case.

What should be included?

• Price• Description of goods/service• Delivery times/time for

performance of service• Period of contract• Payment terms and methods

• Consequences of late payment• When risk and title passes• Termination• Limitation of liability• Intellectual property rights• Boiler plate terms

Beware! There are statutory and common law controls relating to limitation of liability clauses which, if not adhered to, will be wholly unenforceable.

Consumer Contracts – additional considerations

• Who is a consumer?

• No consistent definition in UK consumer protection rules

• Generally, an individual acting for purposes wholly or mainly outside that individual’s trade, business, craft or business.

Consumer Contracts – additional considerations

• Extensive body of consumer protection laws covering issues such as:-

• Sale of goods and services

• Unfair terms

• Cancellation rights

• Information required in advance

Consumer Contracts – drafting tips

• Use plain language

• Use informative headings or examples within a clause

• Consider using summaries or boxes of key terms

• Explain to your solicitor your sales process – how you sell, deliver, previous consumer complaints

• Statutory remedies

• Check exclusions and limitations on liability

• Review your terms regularly

• Avoid legal terms or jargon

Implied terms- Sale of goods and

Sale of Services which include goods

• Good title

• Corresponds with description

• Satisfactory quality

• Fitness for purpose

• Corresponds with sample

• BEWARE! In Consumer contracts these implied terms cannot be excluded by standard terms

Implied terms – sale of services

• Services are to be carried out:

• with reasonable skill and care

• within a reasonable time

• for a reasonable price

BEWARE! In Consumer contracts any attempt to limit a trader’s liability in relation to any breach of reasonable skill and care requirement will only be enforceable if it is reasonable.

Consumer contracts made on or after 13 June 2014

• The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 now in force

• Applies to contract with consumers

• Applies to goods, services and digital content

• Required disclosure of key information before contract

• Allows cancellation / cooling off periods

Consumer Contracts Regulations

• On-premises contracts• Any contract that is not “off-premises” or “distance”

• Distance contracts• Contracts concludes under organised distance or service-provision scheme

without joint presence and with exclusive use of distance communication means. For example over the telephone or website.

Consumer Contracts Regulations

• Off premises contract means any of the following:-

• Contracts concluded in presence of both away from trader’s premises• Contracts concluded after an offer is made by the consumer in presence of

both parties away from the trader’s premises• Contracts concluded on trader’s premises after consumer was addressed off

site and in the presence of both• Contracts concluded during excursions organised by the trader

Level of disclosure and cancellation rights

• On-premises contracts

• Lower disclosure/information requirements• No cancellation rights• Any delivery method

• Distance contracts and Off-premises contracts

• Fuller disclosure/information requirements• 14 day cancellation period• On paper – CHECK in writing or on paper -electronic

Failure to give notice of cancellation rights

• Criminal offence

• Longer cancellation period of 12 months would apply

• Consumer can request you start work immediately, prior to expiry of 14 day cancellation period - require express consent.

• Consequences of not having express consent – any costs/fees incurred during 14 day period not recoverable

On a separate note any limited companies with a website…

Information companies must display

on its website• A limited company must provide the following information on its

website:-

• Company name• Company registration number• Registered office• Email address of service provider• If the business is a member of a trade or professional association;

membership details, including any registration number• VAT number (if it has one) even if website is not being used for e-commerce

transactions.

To summarise

• Get your terms of business in place• Ensure that they are incorporated into each contract • Ensure that your terms apply• Seek to “win” the battle of the forms• If dealing with consumers ensure that you comply with consumer

protection legislation

If you have any question or queries about your terms of business please contact me at:-

josie.appleyard@mtg.uk.net01483 755609

The legal bit: This presentation is not intended to be a replacement for specific legal advice on your own circumstances, rather more an introduction to some of the issues that might require thought. We believe the information contained in it to be correct at the time of print. While all possible care is taken in the preparation of this article, no responsibility for the

consequences of any action taken or refrained from as a result of this presentation and these materials can be accepted by Mackrell Turner Garrett