What are Business Terms and Conditions?
Terms and conditions are essential to any person running a business. They form part of a business contract and set out the legal basis for the rights and responsibilities of the business and customers in relation to the supply of products or services in that contract. It is recommended that all businesses should have their business contracts prepared or reviewed by an experienced commercial lawyer to ensure that the terms of business are correctly set out and business is adequately protected against risk.
Advantages of Terms and Conditions
Terms and conditions will provide a business with protection, including:
- Clearly setting out the scope of the agreed terms of the business transaction;
- Minimising the risk of a dispute occurring;
- A retention of title in favour of the business until goods are paid for by the customer;
- Compensation for potential losses incurred by the business due to the customer’s breach;
- The ability to impose default interest for late payment; and
- Assisting in resolving disputes and unpaid accounts.
The terms and conditions will vary according to different industries and business practices. It is essential that terms and conditions are tailored to the relevant industry and transaction. Generally terms and conditions will have certain clauses in common, including:
- Price and payment terms;
- Delivery and risk;
- Title including retention of title clauses where relevant (these clauses ensure title does not pass until payment is made in full. However, all contracts containing these clauses must be registered on the Personal Property Securities Register “PPSR”);
- Returning goods;
- Warranties, such as a warranty that goods supplied are fit for purpose and free from defects;
- Security and PPSR provisions, such as personal guarantees from company directors, a PPSR security interest over the customer’s business property, and the right to register a caveat over real property owned by a customer or guarantor; and
- Termination and/or liquidated damages clauses;
- Legal cost recovery clauses;
- Governing laws that may apply (this will address what laws will apply and in which court a dispute will be settled based on where the contract was formed); and
State and Commonwealth Level: Legal Requirements
Terms and conditions must comply with all legal requirements at State and Commonwealth levels. This includes the Australian Consumer Law, Fair Trading legislation, and Privacy Act 1988. There may be penalties to a business that does not comply with these requirements, for example where there is a misleading statement in the terms.
Terms and conditions must be disclosed to customers before entering into contracts. There should be a signed acceptance of the terms and conditions from the customer. A business may be legally affected (e.g. cannot enforce the terms and conditions) if it does not properly disclose terms and conditions prior to or at the time of entering into the contract with the customer.
Why trust Johnston Withers Lawyers as your Commercial Lawyer
Our commercial lawyers have extensive experience in preparing business contracts and terms and conditions for all businesses. If you are running a business and require assistance with preparing a business sale contract or terms and conditions or require a review of your existing contract arrangements, please contact Michael Stannard on (08) 8231 1110 in get in touch online.