When selling goods or services, should you use standard terms and conditions or a formal agreement?
To protect your legal position, you should ensure that when selling goods and services (whether to business or consumer customers), you do so using a set of terms and conditions covering important legal and commercial points that you have adopted for the purpose.
The terms that you use for business customers will differ from those used for consumer customers since the latter must comply with applicable consumer protection law.
The terms should be written in such a way as to be favourable to you as seller, or at least even handed as between you and the customer.
In the case of every sale, you will need to ensure that you clearly agree upon the relevant terms with your customer before you actually make a sale to them.
Standard or Bespoke Terms?
The terms that you use might be either standard terms that you use for customers generally, or they can be bespoke, i.e., specifically negotiated with a particular customer.
For routine transactions to customers generally, you may prefer to use your own standard terms.
In contrast to this, the terms that you put forward for sales to a particular customer or for a specific sale to that customer can be negotiated individually by you with them to use for either that customer only or that transaction only. This will be appropriate where you need to take account of specific circumstances relating to a particular customer or to a particular non-routine and/or complex sales transaction. In any such case, you would negotiate and finalise a set of custom terms intended to govern the particular customer or sale - you would not use a set of standard terms of sale that you keep for routine sales.
To create suitable (standard or bespoke) terms, you can use a set such as one of those that you can find here, amended as necessary, or you can have your solicitor produce a set specifically for your business.
Mechanism for Making a Sale
Whether you use a set of standard or negotiated terms and conditions, how the contract is concluded (i.e., how the sale contract is made) needs to be carefully considered. You can have the customer issue an order and you can then issue an acceptance of that order, but crucially these documents must state on them that your terms apply exclusively, i.e., your standard or negotiated terms, and that any customer’s or other terms shall not apply.
If you receive an order form from a customer containing or referring to the customer’s own purchase terms, you can send your terms to them in reply saying in a covering note that the customer’s terms cannot be accepted, and that your terms alone will apply. You should ask the customer to confirm in writing that it agrees to your terms alone before you supply any goods or services to them.
If you use your own standard terms (i.e., not bespoke terms) they can be given to your customer as a standalone document before you have any trade dealings with them, perhaps with a covering letter saying that these terms apply to all transactions. Similarly, such terms could be printed on any other document that you send to a prospective customer before they place an order, e.g., a tender offer or sales brochure. Depending on their length, the terms could even be printed on the back of an order form that you give the customer to sign and return to you. Standard terms can, of course, also be made available electronically, e.g., by email or on your website.
What is “The Contract”?
Wherever you use a set of standard or negotiated terms and conditions in this way, the total content of the terms and the order and acceptance forms will in law be “the contract”.
A contract is made when one party has made an offer and the other has unconditionally accepted the offer. It may not be clear whether, when, or how that has happened in any given case. Your objective should be to ensure that there has been an offer and acceptance and that it is clear that they are both on the basis that your terms (standard or bespoke, as the case may be) and that no others apply. For more information on the formation of contracts, see Imposing Standard Terms and Conditions of Purchase of Goods.
What is an “Agreement” and When and How Should You Use One?
A wide range of Agreement templates, both for goods and services, are available from Simply-Docs. An “Agreement” can be used as an alternative to sending a set of standard or bespoke terms to a customer. Instead of using order/acceptance forms with terms attached when making routine or other sales to customers, you can create a standard form of formal Agreement. Such a document should contain spaces to insert the names and addresses of the seller and customer at the top, and spaces for signatures of both parties and the date at the bottom.
Using an Agreement with Standard Terms
If you have a set of standard terms suitable to govern your everyday transactions, you can use them as part of the Agreement. You could do this by either attaching them to the Agreement as a Schedule and ensuring that the Agreement refers to them, or you can actually set out the standard terms within the main body of the Agreement (as many of our Agreement templates are structured).
The main advantage of using an Agreement in this way rather than a set of terms on their own is that it removes any uncertainty as to:
- whether an agreement (i.e., a contract) has actually been entered into because both parties have signed it;
- which set(s) of terms apply, because the terms that apply will all have been set out in the Agreement as a single document signed by both parties. It is a completely self-contained document, leaving no room for argument that any terms or other provisions apply in addition to or in place of those set out in or attached to the Agreement; and
- the date of the transactions, because it is dated when both parties sign.
Using an Agreement is a more practical means of creating a contract where your sales process is such that you either meet the customer in person so that you can both sign the Agreement at the same time, or you can post the Agreement to them to sign and return to you by post. A disadvantage is that whilst use of any Agreement obviates the need to use order and acceptance forms, it may prove to be a slower process than simply exchanging emails.
Using an Agreement with Bespoke (Negotiated) Terms
You can also use an Agreement where you use bespoke terms negotiated individually with a particular customer, for use when either trading generally with that customer or for a particular transaction. The individually negotiated terms, once agreed with the customer, can be set out in the document or in a schedule to it in the same way that standard sales terms can be set out or attached.
Agreement as a Framework or Call-Off Contract
If the Agreement is to cover a trading relationship generally between you and a particular customer, the Agreement can function as a framework or call-off contract. For that purpose, it can (and preferably should) include in its terms a mechanism for placing orders by the customer and acceptance of orders by you, perhaps by email or text message.
If the Agreement only covers a single transaction, however, it will not need or be able to function as a framework or call-off arrangement, and as a result there need not be any such order mechanism. Instead, the Agreement can set out full details of the particular transaction, e.g., quantities of goods/services, prices, delivery or performance dates, Key Performance Indicators, etc.
When you and a customer sign a form of Agreement, whether for routine or one-off transactions, the total content of that Agreement including any attachments (but nothing in addition) will be “the contract”.
Final Thoughts
The decision as to whether to use a set of standard terms in conjunction with any order, acceptance or other forms, emails etc., or instead to use a formal Agreement does not depend on the content of the terms and conditions to apply. Indeed, that content might be the same in either case. The decision will need to be based instead on the mechanism you wish to use to achieve a contract.
As explained above, the advantage of using a formal Agreement is that it provides greater certainty as to what has been agreed. However, it is less flexible than using a set of terms since a formal Agreement will usually need to be dated and signed by both parties at the same time and in person.
This lack of flexibility in the case of an Agreement can, however, be mitigated by making use of electronic signatures and/or electronic transmission, thereby enabling each party to manually or electronically sign an Agreement, send it by email to the other party who can then sign and return it in the same way. This will mean that the contract will be formed electronically but only when the second party signs and sends back their copy of the Agreement. This contrasts with the situation where the two parties sign and date the Agreement in the same room on the same occasion.
For details of how an Agreement can be created remotely, e.g., by exchange of emails which attach the Agreement that is signed manually or electronically, see Guidance Note on the Formalities for Signing Contracts andGuidance Note: Electronic Signature of Deeds and Contracts and Sample Template Electronic Signature Clause.