Why Standard Terms of Business are Essential for Your Success Protecting your business in a competitive landscape
Having standard terms of business is essential for any organisation looking to trade efficiently, protect its interests, and manage legal risk effectively. For businesses of all sizes, clear and comprehensive terms of business provide the foundation for successful commercial relationships. Learn below a few examples of why standard terms of business are so important.
1. Legal clarity and protection
Establishing your standard terms of business enables you to set out your position up front for how you want to do business with your customers, other companies, suppliers, and any other third parties that you contract with.
Standard terms of business also outline the fundamental obligations and rights for both your business and that of the other party. Therefore, not only does this act to protect your business, but it can help reduce the likelihood of misunderstandings, disputes, or ambiguity regarding the agreed-upon terms, saving you time and money.
A well-drafted set of standard terms provides clarity on essential aspects such as payment terms, delivery schedules, and important limits to your liability. They can also set out dispute resolution procedures if things don’t go to plan.
2. Consistency across transactions
If your business is engaged in repeated transactions or relationships with suppliers, customers, or clients, having standard terms of business can create consistency.
This consistency can avoid having to negotiate the same terms repeatedly, saving you time and resources. Importantly, it also ensures that all parties involved are operating under the same expectations, which reduces the chances of conflict and makes business operations run more smoothly. Examples include: when you get paid, how and in what currency, and what will happen if the particular things that are important to you and your business are not performed by the other party.
In a recent landmark case, a dispute arose concerning the agreed currency for payment. One party insisted this must be US dollars, and the other, being unable to do so due to government intervention outside its control, offered to pay in euros. Ultimately, the parties could not agree, and the matter went to the Supreme Court. Inevitably, the parties racked up huge legal costs and spent much time and resources on this, only for the deal not to go ahead, and so no one won.
With your business terms clearly established, you can reduce the risk of costly legal challenges.
3. Risk management
One of the primary functions of standard terms of business is to mitigate risks. This can be done by including well-drafted clauses setting out what you expect to happen for things to run smoothly, clear dispute resolution mechanisms in case they don’t, and also providing a framework for addressing any unforeseen issues that could arise.
Having terms of business can also help protect your business in the event of delays if another pandemic were to arise, as well as protect the business and enable you to respond to risks in a way that safeguards your financial and reputational interests of the business.
4. Building trust and professionalism
Standard terms communicate professionalism and build trust between parties. For clients, suppliers, or customers, knowing that they are entering into an agreement that is governed by transparent and well-structured terms provides confidence in the business relationship.
Therefore, making sure that your processes allow for clear communication is also key to ensuring your terms of business are in place to bind the other party as well as the provisions themselves.
It can also create a competitive advantage, as it signals to potential partners that your business is organised, reliable, and attentive to legal detail.
Conclusion
In summary, standard terms of business are a crucial part of operating a legally sound and professionally managed business. They provide clarity, consistency, and risk management and help foster trust and confidence among business partners.
By consulting with a commercial solicitor to create and regularly review your terms of business, you can better navigate the complexities of the commercial world and minimise legal risks, ultimately contributing to your long-term success.
For further assistance and to discuss your business needs, please contact Miranda Punter in our Commercial Team, who has experience drafting and reviewing commercial contracts and will be happy to help.
