Terms and conditions are essential for every business. Many businesses print their terms on the back of invoices and quotations, or attach them to sales documents.
Treat it as a balancing act
Creating effective terms and conditions for your business can be a balancing act. They need to be inclusive enough to protect your interests when you sell goods or services, but not so densely packed with legal jargon to be off-putting to customers.
Your terms must also be competitive. Customers might otherwise be tempted to switch to suppliers with less restrictive terms. Focus on being both clear and fair – your aim should always be to build long-term relationships with customers.
Speak with your industry association
Some industries have standard or very similar terms and conditions. This means you could approach your industry association to request a sample of the standard terms widely used in your industry.
Another tactic might be to contact similar businesses (perhaps in a different area, if they are direct competitors) and ask permission to adapt their terms and conditions for your business.
If you get ahold of a typical set of terms, you can use them as a template or starting point for your own terms. However, don’t assume that the terms and conditions will automatically suit your business. You may need to add extra clauses to cover important gaps.
Our terms and conditions checklist
Here are some of the issues that may need to be covered. Not all may be relevant to your business, but work through them and remember it’s important to get your terms vetted by a lawyer and an accountant to ensure you’ve covered all the important bases.
Clarify your terms
Define important terms used in your document clearly such as contract, buyer, seller, products and services.
Use quotations
To avoid possible disputes later on, explain exactly what you are supplying for the quoted price.
Outline any deadline for your quote. For example: "All prices are valid for 30 days from the date of quotation," or "Valid until [date]." Consider stipulating shorter time frames in volatile conditions.
Pricing issues
Contract price means the price of goods as agreed between the buyer and the company and as indicated on your invoice.
Customer acceptance
Clarify when you’ll regard the order as confirmed. This could be when the customer signs acceptance of your quotation or contract, but could also be when you start receiving instructions from the customer.
Make it clear that the buyer’s acceptance of your quotation or contract also makes your terms and conditions definitive and binding.
Changes to orders
Alterations to an order before it’s delivered can be very costly. That said, changes along the way are common in fields like construction or software development and can create delays and significant extra expenses. Make it clear that customers will be responsible for any additional costs caused by their desired changes.
For example, a printer follows a standard practice of getting the customer to sign acceptance of final proofs of letterheads, business cards and other business stationery. Any later changes are billed to the customer.
Payment options and expectations
Clarify when payment is expected (such as within 7 or 30 days of the invoice) along with other payment terms. Consider giving customers a variety of ways to pay, such as by check, cash, online direct credit or credit card. Specify any extra charges that might apply to the use of any of these payment methods.
A timeline for delivery
The quote, order or tender should include a timeline for delivery. If no time is stated, note that payment is due on delivery of the order unless credit terms have been agreed.
Overdue penalties
If you intend to charge interest on late payments, make this clear in advance in your terms and conditions, and get the customer’s signed acceptance beforehand.
Identify ownership
Speak to your lawyer about the terms you can use to identify ownership of the goods or services until final payment is made.
Dispute resolution
It can be important, especially for export orders, to specify the involvement of an impartial arbitrator in the case of certain disputes and clarify whose jurisdiction will apply.
Intellectual property ownership
If the goods or services you’re supplying include an intellectual property component, define who will own the IP.
For example, you may want to retain ownership of copyright texts or software coding. This can be an issue if you’re licensing goods or services rather than selling them outright.
Warranties and guarantees
Explain what any warranties or guarantees will cover (such as defects or time limits) and what’s excluded, such as misuse of a product or unauthorized repairs.
Note whether you’ll supply a completely new replacement or repair the product or service. If any shipping costs are involved (such as returning a product to your premises), specify who will bear the associated costs. No matter the specifics of your business, make sure any policy you have on returning goods is perfectly clear to any and all customers.
Shipping and insurance
Exports and long-distance deliveries in particular need clarity regarding who’s responsible for shipping costs and insurance for goods in transit.
Limiting your liability
Consider a clause limiting your liability for any loss, damage or injury caused by your goods or services. Acceptance of your terms by the customer should mean your business is indemnified against claims or lawsuits.
Keep in mind that the purpose of the terms and conditions for customers is to eliminate any misunderstanding about the relationship, thereby allowing both parties to make the right decisions.
