Terms and Conditions: is it time for a refresh?

Dan Dowen, Commercial Contracts Senior Associate, sets out below, the importance of terms and conditions and why they should be reviewed and refreshed on regular basis.

Over recent years, we have seen several key developments that have impacted the way businesses operate, which in turn, affects how they may provide their goods and services. Such developments have included but are not limited to, the introduction of the General Data Protection Regulations (GDPR), the UK’s exit from the European Union and, of course, the effects of the Covid-19 pandemic.

As a result, there have been various substantive changes in the law and new risks for businesses to consider, particularly in relation to its existing contractual relationships, which in many cases will be governed by terms and conditions.

As a business, your terms and conditions are key in protecting you from risk and financial exposure. It is therefore crucial that your terms and conditions are reviewed and refreshed every 3-5 years to make sure they are up to date and reflective of current industry practices and legal requirements.

Why do I need terms and conditions?

Terms and conditions provide your customers with the details of how you will supply your goods and/or services. They set out the expectations of each party as well as their rights and obligations, and if drafted correctly, they should reduce your risk by limiting your financial exposure and excluding certain other liabilities. As such, it is vital that your terms are tailored to your business and specific risks that may arise.

Your terms and conditions will provide protection and certainty for your business whilst enabling you to standardise your procedures and trade on consistent terms. Thereby, having a well drafted and robust set of terms and conditions will avoid the time and expense involved in drawing up specific terms for each individual transaction and will enable you to introduce terms that are favourable to you.

Why should they be refreshed?

As briefly mentioned above, during recent years there have been some major legal changes and international occurrences that have required businesses to consider the details of their terms and conditions, with many businesses finding themselves exposed both legally and financially, often due to stale and outdated terms and conditions.  

In the current heightened regulatory and economic environment, it is imperative for businesses to review and where appropriate refresh their terms and conditions on a regular basis to ensure that they reflect current operational feasibility, business arrangements and legislative and regulatory standards.

In short, now is a great time to revisit and update your terms and conditions.

What are the key terms that I should review and update?

During any review of your terms and conditions, we would suggest that an initial focus on the following clauses would be an ideal starting point:

  • Payment terms: your payment terms should be comprehensive and set out when and how payment should be made. They should also set out the consequences of late payment, which often includes applying an interest rate on the overdue amount. In addition, to guard against the impact of currency exchange rates resulting from Brexit, you should ensure that your payment terms include provision for reviewing, varying and/or increasing your prices.
  • Delivery: your terms and conditions should include clearly stated terms relating to delivery and/or performance including, the place, time and any consequences of late delivery such as additional charges. Brexit has caused delays in deliveries so going forward, to afford your business some flexibility, it would be prudent to avoid agreeing fixed delivery dates or ensuring that time of delivery is not of the essence. Also consider the changes in the costs and rules relating to imports, exports and customs and ensure that you set out in your terms and conditions, how carriage and transport costs are to be borne.
  • Limitations of liability: a liability cap / limitation of liability will limit the damages that you have to pay if you breach the terms or become liable for any damages under the terms and conditions. Such clauses should be reviewed regularly to ensure they are providing the adequate level of protection to your business.
  • Compliance: consider any changes in compliance with certain regulations, bodies or laws and whether references to them need to be amended.
  • Data protection: review your data protection provisions to ensure that references to legislation are up-to-date and compliant with the UK’s data protection laws.
  • Termination provisions: consider what events should trigger termination (for example, a material breach by the other party) and the consequences of early termination by them.
  • Force Majeure: force majeure clauses provide that if an event beyond the control of the parties occurs, the contract may be terminated or suspended without any further liability being incurred by the parties. Careful drafting of this clause can ensure that pandemics and other international incidents could constitute a force majeure event if your business is likely to be adversely impacted by such events.
  • Governing law: any references to any laws that will no longer be relevant to UK agreements will need to be revisited and amended to ensure the correct law is referenced.

How can we help?

We, at Berry Smith, consistently draft, advise and review terms and conditions for our clients, whether in relation to the first set of terms and conditions our client is putting in place or to update and refresh existing terms and conditions.

We have an excellent knowledge of the provisions that must be included in a business’ terms and conditions to afford it the necessary legal and commercial protection required and ensure such terms and conditions are in line with legal and regulatory changes.

For further information or assistance, please contact Dan Dowen at ddowen@berrysmith.com or alternatively call 02920 345 511 and ask for the commercial team.