Are your customers coming to terms with the way you do business?

One important aspect of business management is setting out the terms and conditions under which your business offers its products and services. Most businesses fail to appropriately prioritise this until an argument arises between a business and its customers. At this point, it is too late to try and agree how the transaction should have been handled, and you are left to try and deal with the consequences. With customer complaints made via social media on the rise, severe damage can be caused by a disgruntled customer. Accordingly, it is good practice to have a clear, concise and comprehensive set of terms prepared from the outset. Usually, this is around the time you are deciding on your business form and before you start trading.

Terms and conditions (or terms of business) can be contained in a single document, and detail the conditions under which you supply your products and services. Although a document is not required by law, having a formal, written agreement in place removes uncertainty in a business transaction and avoids misunderstandings over what has been agreed between you and your customers.

Depending on the nature of your business, some terms are required or enforced by law, others are created through best practice and risk management. In most instances, a single set of terms are sufficient to manage every customer transaction. However, even if you have been trading under the same terms for sometime without issue, it is worthwhile to evaluate whether they still meet your needs as your business develops and as laws change.

Early considerations

Your business model will impact on the terms your business needs and which laws govern your business transactions. The first step is to identify what industry your business operates in, what it sells, how it sells, and to who. For example, different laws must be adhered to depending on whether you are selling goods, suppling or services, or doing both. Also, selling online or running an eCommerce platform has different consequences when compared with selling in person or in a physical store. There are also different considerations depending on whether you are selling to consumers (B2C) or selling to other businesses (B2B). Most businesses have their own set of terms, and sometimes it can be difficult for businesses to agree on whose terms should govern the transactions - a concept known as 'battle of the forms'.

In most cases, a business is free to decide on the terms they wish to impose on their customers. However, it is important to note that certain laws prevent you from imposing unfair terms onto your customers, for example, a business cannot limit its liability in the event they have acted dangerously or dishonestly in a transaction.

Seeking professional advice

Rather than attempt to cover every possible business transaction, this post will be focused on introducing the concept of terms and conditions for business to consumer transactions (B2C). In later posts, we will cover the different types of transactions discussed above.

As with all our content, we strongly recommend that you get in contact and obtain professional advice so you understand and comply with the relevant aspects of business and consumer law before you start trading. The concepts included in this post are not specific to any business or scenario, but will place you in a good position to understand the basics – saving you time and money in the long run.

Organisations such as the Citizens Advice Bureau are always on hand to provide advice to consumers who feel they have been wronged by a business. The same applies to businesses wishing to be better informed and prepared to handle potential complaints. Some great places to start include the Trading Standards Institute and the Department for Business, Energy & Industrial Strategy (formerly the Department for Business, Innovation and Skills). These resources will provide you with a broad range of content and guides relating to business, consumer and trading laws.

Why have a set of terms and conditions?

In addition to the reasons set out above, having a single set of well drafted terms has many benefits for businesses. Firstly, it saves on the time and expense of having to prepare different terms for every transaction you enter into. Being familiar with your usual terms ensures that you can clearly explain to customers the conditions under which you sell your products. It allows you as a business to decide on how you manage your transactions, and avoids the situation where your customers try and decide this for you. In most cases, customers are usually happy to agree to your terms, provided they are fair and reasonable, and do not place unnecessary or extensive burden on them.

When to make your customers aware of them

The law makes it clear that terms cannot be introduced once both parties have agreed to enter into a transaction. We have seen on many occasions businesses send invoices with their terms overleaf. This is good practice to act as a reminder for your customer, for example, when payment is due, although your customer should be made aware of your terms before they contract with you. So, before you allow you customers to purchase your products, make them aware that the purchase will be made under your standard terms. They may be contained on your website, your brochures and advertising materials, or any proposals or quotes you put forward.

What your terms should include

Below are some areas your terms should detail, and which are common areas for disagreements to arise. However, additional terms will be required depending on the exact nature of the transaction.

  • A clear description of the products or services you will be offering

  • When and how the customer will receive them

  • How, when and under what conditions payment will be due

  • Any guarantees or warranties being offered, or liability being disclaimed

  • The circumstances of cancellation and the consequences of doing so

  • The process a customer should follow if they wish to raise a complaint

Coming to terms with business

The key message is to never underestimate the value of clearly defining the conditions of your business to consumer transactions. The guidance above should place you in a good position to evaluate your need for business terms. It will help you consider the risks and protect your business's reputation. Setting up and growing your business is a challenging task, don't make it more so by not having terms in place.

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