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We create contracts all the time, without really realising it

Introduction

Tapping your card on a reader, you’ll be looking forward to the coffee that’s on its way. You could definitely be forgiven for not thinking about the contract that you are entering into. But in our daily lives, we do create contracts all the time, without really realising it. Generally, that seems to work pretty well, without having anything in writing. But you wouldn’t buy a car, or a house, without having a written contract, would you? When does it start to matter? The difference is knowing when there is a need to manage risk. So if you are committing a big lump of cash, having the deal in writing makes it clear what the deal is, and gives you some come back if things go wrong.

Business

Why you need standard terms

It’s the same with B2B transactions. If you are selling products or services without a written contract, you won’t know what your rights are when things go wrong, or when someone doesn’t do what they said they would do. Misunderstandings are far more likely if you haven’t set out your expectations in writing. And, if you have slipped up, you could be exposed to liabilities with the potential of bringing your business down.

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They are an essential risk management tool

Managing risk

This is where standard terms of business come in. They are a contract, yes, but more than this, they are an essential risk management tool for your business: you can do business on terms you know that work for you and your customers, and you can limit your liability if things go wrong. Businesses that have thought about their sales process, identified problem areas, and made sure that these are documented, will reduce the risks their business is exposed to, and be better prepared for when things do go wrong. Standard terms make sure that you and your customers are clear about commercial aspects of your relationship, such as price, warranties, delivery and payment. They also think ahead about what could go wrong, to prevent issues arising, and, should the worst happen, give you rights and protection to reduce your exposure.

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Borrowing can be a risky business

Make them your own

A word of caution here: ‘borrowing’ standard terms from another business is risky. Breach of copyright aside, they need to reflect your business, your relationship with customers, your policies and procedures, and your attitude to risk. Putting your own standard terms in place gives you the opportunity to make the commercial decisions about how you do business, and what risks the business takes. Nabbing them from somewhere else, without thinking them through in this way, could create more problems than it would solve. Plus, it looks good from a customer perspective if your standard terms have the right look and feel for your business.

One last thing – a critical part of making sure that standard terms work for you is to embed them properly into your sales workflow. To be legally enforceable, you need to show that the customer has seen them before sales are made. Essentially, this means that your standard terms need to be embedded in all early communications with customers, including things like brochures and quotes, ahead of any sale being confirmed, or you won’t be able to rely on them.

Author Nicola Proudlock

Written by Nicola Proudlock
Principal at My Inhouse Lawyer

One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.

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