Getting the right terms and conditions in commercial contracts

Jessica Cousin
Solicitor, Corporate

Q.
Do the terms and conditions sections of commercial contracts really matter, and is it safe to just take them as read?

A.
When it comes to accepting the terms and conditions from, say, a phone contract supplier or software provider, most of us just tick the box and move on – but when it comes to the T&Cs in a business-to-business contract, taking that sort of approach could mean you’re storing up all sorts of problems for the future.

Terms and conditions are designed to allow companies to consider in advance what might possibly occur as part of the relationship into which they’re entering through the contract and to put mitigation in place to manage such issues if they do at some point arise.

The terms and conditions in many of the contracts that come across our desks for review lack clarity in their construction, don’t cover all the relevant issues or simply haven’t been given anything but the briefest attention, despite arguably being the most important part of the contractual relationship between the parties, given they govern the main terms of the intended business.

Their contents need to relate specifically to the commercial relationship in question, rather than being a ‘one size fits all’ provision.

It is essential to explore with your advisors any foreseeable risks that your business could be facing, or could potentially face in the future, so that those issues can be addressed in advance in an updated version of the proposed agreement.

Thinking ahead is key to ensuring all of the risks are covered adequately in your T&Cs. Those ‘smaller risk’ issues can often be the ones that cause you the most pain if not addressed properly.

Updating your own T&Cs is essential as your business grows, to ensure that they are in line with any commercial changes the company has faced and with any legal updates.

Not doing so regularly means more contracts will be formed with other businesses on terms that are not favourable to your company – and the more out of date the T&Cs are, the higher the risk of a clause coming back to bite you down the line.

As ever with legal documentation, taking the time to do this work in advance gives you the best possible chance of avoiding any problems in future, especially ones which could and should have been anticipated.

Whether you are updating your own T&Cs, or if you’re presented with a contract for signing, it’s essential that you don’t take things as read, that you seek qualified legal advice on its contents, and especially that you seek this advice before signing anything.

Once your signature is on the document, there’s usually very little that can be done to correct any issues within it that haven’t been properly considered.

For further information managing all aspects of commercial contracts, please contact Jessica Cousin on 0191 232 8345 or via jessica.cousin@hay-kilner.co.uk.