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.
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