If a customer is large enough to have its own terms on which it buys your goods or services from you, (usually called terms and conditions of purchase), chances are, they will be the opposite of what your terms and conditions of sale should say (we know because we write both!).
If as a supplier you are asked to sign up to the customer’s terms to provide your goods services, firstly note, that it’s a matter of commercial will whether you agree to do this or seek to get the customer to sign your terms. (Although your terms are likely to be negotiated by larger customers in particular, at least you are chipping away at your terms rather than trying to build up theirs!). It’s all about bargaining power.
For some, if you really want to bag that big customer, it may feel as though you have no choice but to start with the customer’s terms and conditions of purchase. If you find yourself in that position, then consider these mistakes below, and if the contract is big enough or important enough it may be worth getting a little bit of help.
1.They don’t think about what is missing
Typically, the following things will be missing from the customer’s terms. The customer doesn’t need to include them because the default legal position works in their favour. As a supplier, you NEED THE WORDING to give you protection!
- Liability – there is unlikely to be any exclusion or limitation on your liability.
- Force majeure – there is unlikely to be any wording to protect you if you can’t supply for reasons beyond your reasonable control.
- Rights to terminate or suspend services for non-payment/ late payment or for other breaches of contract by the customer are unlikely to be included.
- Rights to increase the price are unlikely to be included.
2.They don’t understand the significance of the word “indemnity”
If you agree to indemnify the customer, this (a) makes it easier for the customer to bring a claim for damages; and (b) increases the amount you are potentially liable for, in both instances, than would otherwise be the case under a properly written set of terms and conditions of sale.
3.They don’t understand their own key legal and commercial risks, so they don’t know what they are looking for.
(See our Blog – If you don’t know where you are going, any road will do)
If you have properly written bespoke terms and conditions of sale written for your business by a good commercial lawyer (another blog for another day), that lawyer, through a collaborative process with you will (should) have mapped your business and risk profile to the terms and conditions of sale which protect those key areas of legal and commercial risk.
If you are going to review the customer terms, I strongly advise that you either compare against your own terms and conditions of sale or if you have none, think about the key legal and commercial risks you want to cover as a first point. If the contract is important enough to you, it may be time to get the lawyers involved to get it over the line and give you some peace of mind, so that you can focus on the day job!
In some instances, you may not have the luxury of stopping to review the customer terms, they might apply anyway! (See Don’t get caught in a battle (of the forms!))
If you would like to discuss in further detail or have any questions about terms and conditions, then get in touch with Tracey today: tracey@law-point.co.uk.
