The pitfalls of not having terms & conditions

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What are some of the pitfalls of not having terms and conditions? We hear many risky stories of companies going without terms and conditions altogether or using terms and conditions that do not belong to them and were not tailored to them.

Here we explore just some of the risks of not having terms and conditions.

1)     Payment terms: clarity on when fees and payments are due, how they are to be paid and interest charges and other feesIf it’s not clear what is included and what is excluded, you run the risk of missing out on being able to charge for (and recover cost) for goods and services provided.

2)     Risk allocation: first and foremost, terms and conditions serve to be a risk allocation document that set out the risks relevant to your goods and services and which party will bear each risk and in what circumstances.  Chances are if you don’t have terms and conditions or don’t have properly drafted terms and conditions, you’ve allocated yourself more risk than you bargained for.  For example, what time frames do you accept? Who runs the risk of timing of decision making and instructions of your client or customer? If they don’t respond in the right time frame, does your timeline or deadline push out or do you wear the risk of delayed instructions or delayed client/customer decisions?

3)     Dates: when the agreement starts and finishes.  The date that the services of goods will be provided… All key milestone dates.  These are just some of the things that are covered by well drafted, terms and conditions.  Having certainty around dates minimises the scope for a frustrated customer or client and makes it clear, upfront, what everyone has agreed to.

4)     Exposure to warranty claims: without terms and conditions, you are missing out on clearly prescribed warranty terms that make it clear to any clients, hirer or purchaser, just when you are on the hook for a warranty claim and, more importantly, when you are not on the hook for a warranty claim.  These need to fit within the legal requirements.

5)     Scoping inclusions and exclusions: good terms and conditions make it clear precisely what is included in your scope, your quote or fee and, importantly, what is not included in your scope, quote or fee.  By having certainty around inclusions and exclusions, you may avoid a claim that further goods or services were included in the original scope, quote or fee, for example.

6)     When you are on the hook, and when you are not: good terms and conditions make it clear what you will be responsible for, and the things and actions that you are not responsible for.  Typically, you will not be responsible for any use of your products or services outside of their intended purpose or scope.

7)     Title and risk: for the sale of goods, this refers to when title and risk passes to the end consumer.  For the hire of goods, this refers to when risk in the good hired passes to the other party.  These both make it clear when the other party is on the hook (and, more importantly, when you’re off the hook).

8)     Fees: good terms and conditions would make clear all components of your price or fee.  This includes additional fees such as bond or delivery, fees that apply if things go outside the scope or outside of time.  Having clearly expressed fees can make it easier for you to recover those fees.  This is particularly important for scope increase and to ensure that you are protected for your fees for any such “scope creep”.  Failure to have clear terms and conditions surrounding your fees may mean that you are required to pay for disbursements or extra fees that haven’t been properly disclosed to the customer, or, the customer not having to pay for certain additional services that weren’t disclosed upfront in your terms and conditions. 

 For tailored terms and conditions that properly address risk and allocate risk between the parties, Coutts is here to help.  For further information please don’t hesitate to contact:

Alexandra Johnstone
Partner
alexandra@couttslegal.com.au
02 4607 2110  

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.