Businesses: it’s time to spring clean your contracts
More than half of businesses do not fully understand the rules on unfair contracts, according to research from the Competitions and Markets Authority. Jo Cook of Coodes Solicitors’ Corporate and Commercial team explains the benefits of investing in up to date, bespoke terms and conditions for your business.
“Business owners have so many pressures on their time that it’s no surprise that reviewing and investing time and money in their contracts with consumers or businesses is rarely a priority. In fact, I am often asked to advise on contracts when they have already run into problems with a customer or supplier due to their terms and conditions.
“Increasing numbers of businesses copy terms and conditions from other contracts they find on the internet. While this may seem like a good way of setting up contracts for free, it is very risky. Just because another firm’s contract looks professional, it doesn’t mean it is or right for your business.
“One of the key issues with simply copying and pasting other business’ contracts is that the terms may not comply with the Consumer Regulations Act 2015. This means they may not be enforceable. The Consumer and Markets Authority has published some excellent guidance on unfair contracts. Their research has shown that 54% of businesses do not fully understand the rules of unfair contracts, while 36% do not have a strong grasp on unfair contract rules. Unfair consumer contracts give a business an unfair advantage over consumers by reducing their rights and their ability to complain if things go wrong. In addition to the actual terms and conditions, the regulations cover aspects such as font size and readability. To be sure of complying with the Consumer Regulations Act, businesses should seek the advice of an experienced commercial lawyer.
“There are a number of other potential problems with using other business’ contracts, including:
- the terms may not reflect your business’ procedures. For example, you might expect payment within 30 days but the terms may say otherwise;
- the terms may not exclude the correct sort of liability or limit your liability, which can cause serious problems further down the line;
- if the language and terminology used in your contracts is inconsistent with other documents, such as credit agreements, this can look unprofessional as well as creating discrepancies in your contract terms and therefore uncertainty;
- importantly, your terms might make promises to your clients that you are unable to fulfil; and
- you could be breaching copyright by using another’s terms.
“For any company selling goods or services, it is vital that your terms and conditions are right for your business. And of course things change, so it would be wise to make a diary note to have your contracts reviewed every year.
“Having reviewed or bespoke terms and conditions can save you time, help prevent disputes and reputational damage, and protect your business if something goes wrong. Is it time to spring clean your contracts?”