Terms and Conditions – Get friendly with your Fine Print
If you are setting up a new business or reviewing your day to day practices for an existing business, it’s important not to forget to update your terms and conditions or terms of trade.
Many businesses that supply goods or services rely heavily on their terms and conditions as the first port of call when things go wrong with a customer. Having a well drafted set of terms and conditions ensures that you don’t waste money on legal fees incurred trying to resolve disagreements.
Common pitfalls of poorly drafted terms and conditions
We encounter many clients who are not familiar with their terms and conditions or have “borrowed” them from similar business’ websites or quotations. The following are some of the common pitfalls we see in poorly drafted terms and conditions:
1. The terms and conditions are not specific to your business
Terms and conditions for a variety of businesses are readily accessible over the internet. Many businesses “borrow” bits and pieces from other businesses and stitch them together to make their own terms.
The consequences of doing this are that your terms and conditions probably include practices that don’t apply to your business, work to your business’ detriment or are unlawful. For example, a business that relies on weekly invoicing for cashflow might have terms and conditions with monthly payment terms.
These errors may go unnoticed until a dispute arises with a customer. When a dispute does arise, you will not be able to rely on your own documentation. This may result in you not being able to enforce payment from your customer.
2. The terms and conditions contravene the Australian Consumer Law
Unfair Contract Terms
The Australian Consumer Law protects small businesses and consumers from unfair terms in contracts. Your terms and conditions may be unenforceable or void if you include terms which you see as protecting your business, but may be seen by a court as unfair.
For example, you own a car wash business and your terms and conditions state that you are not liable for any damage to your customer’s vehicle even if it is due to your negligence. This term is likely to be deemed unfair. There is a clear imbalance of the parties rights and obligations arising from the agreement, the result of which, is a clear disadvantage to the customer.
They exclude guarantees
The Australian Consumer Law contains automatic guarantees that cannot be lawfully excluded. Many terms and conditions we see restrict the consumer’s rights in relation to the goods and services and protect the business’ liability to the point where the terms and conditions contravene the Australian Consumer Law.
An example of this is, a customer purchases electrical goods from you, the goods are faulty and do not work. The terms and conditions attached to your
products say that there are no refunds even in the case the goods are faulty.
Under the Australian Consumer Law the customer has a right to ask for a repair, replacement or refund.
A contravention of any of the above may result in your terms and conditions being unenforceable or in a worst case scenario, a customer may commence legal proceedings against you in order prove that your terms and conditions are unenforceable. A correctly drafted terms and conditions document can ensure that you limit your liability without contravening the Australian Consumer Law.
3. Terms and conditions are overly complex and inaccessible
Will anyone actually read my terms and conditions? Certainly not for fun, but when a dispute arises or clarification is required on a key term of the agreement it is the first document you and your customers will reach for.
Many terms and conditions are not easily understood by parties which causes confusion and disputes. Examples of this include:
- making the language so complex so that obligations are unclear
- referring to the terms and conditions but not actually providing the customer with a copy of the document; or
- providing the terms and conditions in a format which is indecipherable. In one instance, we have had to print a client’s terms and conditions on A3 paper just to see the fine print!
What should I include in my terms and conditions?
Take the time to review your terms and conditions and ask yourself, do my terms and conditions clearly set out:
- the nature of the relationship between my business and my customer?
- the term of the agreement?
- the details of my services or goods being provided?
- payment and invoicing arrangements?
- protection for payment – for example requesting personal guarantees for companies?
- a dispute resolution procedure?
- lawful limitation of liability?
Drafting your terms and conditions in a user-friendly way will ensure that everyone is on the same page in relation to their obligations and will keep your customers happy.