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Guide to Drafting and Reviewing Terms and Conditions

The creation of terms and conditions can be a particularly time-consuming and complicated task, which many businesses know little about. Similarly, reviewing these documents is also confusing. Lupton Fawcett is here to make these processes easier. Contact us today via telephone on 0333 323 5292, email law@lf-dt.com, or fill out our online enquiry form.


If you would like some general guidance on drafting and reviewing terms and conditions, read on for further information.

This guide is aimed at terms designed for the purchase of goods and, to a lesser extent, the purchase of services. If drafting terms of sale, the emphasis shifts; for example, a seller will aim to limit its liability whereas a buyer will aim to extend the seller’s liability.

The terms should be drafted to (a) achieve what they are intended to achieve, and (b) comply with the law. Below are some of the questions which should be asked. You should also make sure that your terms and conditions of purchase are harmonised with your terms and conditions of sale.

Basis of the sale

How does offer and acceptance occur? Does the seller accept the buyer’s order, or the buyer accept the seller’s quotation? Is the contract definitely going to be on your terms? As a minimum precaution, your orders should state that the contract is subject to your terms, and enclose a copy. If the seller sends an order acknowledgement saying that the contract is on its terms, you should immediately write back saying it is on your terms.

Orders and specifications

Can you cancel your order at any time until delivery? This will be less reasonable if the goods are produced to your specification.

Price of the goods/charges for the services

State that prices quoted by the seller may not be increased without your written consent.

Terms of payment

It is usual to state the period in which you must pay for the goods/services.

If you are late in paying, interest can be claimed by the seller under the Late Payment of Commercial Debts (Interest) Act 1998, at the rate of 8% above base rate. This right cannot be excluded unless you include in your terms a ‘substantial remedy’ for late payment. It is not clear what this would be in every case, but you could state that you will pay interest at a lower rate than 8%.

Rights in input material and output material

Who will own the intellectual property rights in material provided to and by the seller (e.g. specifications and drawings, and final designs), and what material is to be kept confidential?

Delivery

Do you want the seller to deliver the goods to you?

If you state that time is of the essence of delivery, you will have the right to cancel your order if delivery is late. If you would prefer simply to incentivise the seller to deliver on time, state that, without prejudice to your other rights and remedies, you will charge liquidated damages of a certain percentage of the value of the goods for each week (and pro-rata for each day) that the delivery is late. You must, however, make the charge a realistic estimate of the loss to you that the late delivery is likely to cause. If it is a penalty, not reflecting the true loss to you, it will be unenforceable.

It is usual to state that the seller will not be liable if its failure to deliver on time or at all is caused by an event beyond its reasonable control, such as an act of God or a strike.

Warranties, liability and returns

This guide is drafted on the basis that you are not a consumer.

As the buyer, you will not want to limit the liability of the seller for substandard goods or services, or losses you incur as a result of breach of the contract, so you will say nothing about the seller’s liability but could add a warranty given by the seller that the goods will comply with their specification and be free from defects for a certain period.

Are you buying durable goods or consumable goods? Durable goods frequently develop problems through inherent defects, wear and tear or simply the lapse of time, whereas consumables do not. The warranties should correspond with the nature of the goods.

Do you want the seller to repair, replace or give refunds for faulty goods?

How long should you have to inspect the goods and notify the seller of defects in them or their failure to correspond with their specification? If you say nothing, you will have to notify the seller that you reject the goods within a reasonable time after delivery, otherwise you will be deemed to have accepted them.

Indemnity

Make the seller indemnify you against all costs, damages, expenses and other liabilities resulting from infringements of third parties’ intellectual property rights, other than those arising out of the use of specifications provided by you.

Insolvency

It is usual to give both parties the right to cancel the contract should the other party become insolvent.

Export terms

If buying goods from abroad, who is to be responsible for complying with laws governing the import of them and paying duties?

Termination

Can you terminate services you have ordered? Make sure that you can terminate services if the seller is in breach of contract.

General

Do you have clauses covering miscellaneous provisions such as severability, waiver, choice of law, entire agreement and giving notice?

Guide to Drafting and Reviewing Terms and Conditions of Sale

This guide is aimed at terms designed for the sale of goods and, to a lesser extent, the supply of services. If drafting terms of purchase, the emphasis shifts; for example, the buyer will aim to extend the seller’s liability, not limit it.

The terms should be drafted to (a) achieve what they are intended to achieve, and (b) comply with the law. Below are some of the questions which should be asked. You should also make sure that your terms and conditions of sale are harmonised with your terms and conditions of purchase.

Basis of the sale

How does offer and acceptance occur? Does the seller accept the buyer’s order, or the buyer accept the seller’s quotation? Is the contract definitely going to be on your terms? As a minimum precaution, your quotations, acceptances of order and delivery notes should state that the contract is subject to your terms, and enclose a copy.

Orders and specifications

Are the goods produced to the buyer’s specification? If so, (a) the buyer should not be able to cancel the order, and (b) the buyer should indemnify the seller against claims for infringements of intellectual property rights.

What if you do not have sufficient goods in stock to meet an order?

Price of the goods/charges for the services

How long are quoted prices valid for? Are you able to increase prices in line with, e.g., exchange rate fluctuation or the retail price index?

Terms of payment

What can you do if the buyer is late in paying?

If taking payment by credit or debit card, when will you take the payment?

Rights in input material and output material



Who will own the intellectual property rights in material supplied to and by the seller (e.g. specifications and drawings, and final designs), and what material is to be kept confidential?

Delivery

If delivering, have you stated that you are not liable for late delivery?

Have you stated that you are not liable for failure to deliver if the failure is beyond your reasonable control?

What happens if the buyer fails to take delivery?

Risk and property

Have you retained property in the goods until the buyer has paid in full for them? Have you made sure that risk in the goods passes to the buyer on delivery?

Do you have an ‘all monies’ clause? Insurers often require that you do. It enables you to retain property in the goods sold under the current contract until all monies due under the current contract and all other contracts between the seller and the buyer have been paid in full.

Warranties, liability and returns

Are you selling to consumers? If so, (a) you cannot exclude certain warranties implied by law about the quality of goods; (b) state that the consumer’s statutory rights are not affected by these terms; and (c) your terms must be written in plain, intelligible language.

Do your limitations and exclusions of liability comply with the Unfair Contract Terms Act 1977? If not, they are unenforceable.

Are you selling/buying durable goods or consumable goods? Durable goods frequently develop problems through inherent defects, wear and tear or simply the lapse of time, whereas consumables do not. The warranties available should correspond with the nature of the goods.

Do you offer a repair and maintenance service instead of a warranty?

How long should the customer have to inspect the goods and notify you of defects in them or their failure to correspond with specification?

Do you sell to consumers over the internet? If so, your terms and conditions must comply with the Consumer Protection (Distance Selling) Regulations 2000. Amongst other things, they must tell the consumer of its right to cancel the order and return the goods within 7 working days of receipt of the goods.

Indemnity

The seller normally indemnifies the buyer against claims for intellectual property rights infringements, other than those arising out of the use of specifications provided by the buyer.

Insolvency of buyer

Do you have the right to cancel the contract and does payment become immediately due if the buyer becomes insolvent?

Export terms

If your goods are to be exported from the UK, who is to be responsible for complying with laws governing the import of them and paying duties?

Termination

Can the buyer terminate services it has ordered? Can you terminate services if the buyer is in breach of contract?

Data protection

Do you take customers’ details over the internet or otherwise? If so, you should tell them of any non-obvious purpose for which you might use these details, in order to comply with data protection laws.

General

Do you have clauses covering miscellaneous provisions such as severability, waiver, choice of law, entire agreement and giving notice?

Please note that this website contains general information and does not constitute advice on any specific matter. Whilst Lupton Fawcett endeavours to ensure that the content on the website is accurate and up to date, nothing on the website should be construed or regarded as legal advice. By using this website you confirm that you have not relied on any such content.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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