Start-up business: what your standard terms and conditions should cover
For new start-up businesses the thought of instructing lawyers to draft their terms and conditions may be overwhelming and it may be tempting to purchase “off the shelf” T&Cs, however, these will not be reflective of your business and how you operate and often what is missing is just as important as what is there. For example, we often see T&Cs which contain no cap on liability which means their financial exposure under the contract is potentially unlimited.
At the outset it is important to reflect on what your business is providing and who you are providing to. For instance, terms and conditions for the supply of goods are, as you would expect, vastly different from terms and conditions for the supply of services. In addition, your terms will need to be different when dealing with consumers from when you are dealing with businesses as consumers are offered additional legal protections. Similarly, an entirely different set of terms and conditions are required when dealing with software.
Below are some key provisions which we recommend be included regardless of the type of product or target audience. How those terms are presented may however look very different depending on who you are supplying to and what you are supplying.
In this article we have covered terms and conditions for when you are supplying goods/services/software but it is equally important to get the terms and conditions right for when you are purchasing any of those items.
Key legal terms we recommend are included in your standard T&Cs:
Price and payment
Clear provisions should be in the agreement as to the price and what you are providing for that price. The time for payment should be clearly set out in the agreement, for example payment is due after a set period from the date of the invoice or the delivery of the goods. The terms should also specify what happens on late payment- will you be able to charge interest and at what rate? Will you be able to terminate the agreement and demand immediate payment of all invoices?
Term & termination
The agreement should clearly set out the intended term of the agreement, for example, is it intended to exist for a fixed period only or until terminated.
In addition, we recommend the agreement clearly set out in what circumstances either party can terminate the agreement. Agreements typically contain rights to terminate the agreement in the event of material breaches, repeated breaches and acts of insolvency.
Limitation of liability
As a provider, it is important that your terms and conditions set out clear limits and exclusions of liability. An ultimate cap on your liability is an important tool to ensure you aren’t over-exposed for any breaches. The same applies to giving clear limits on what types of losses you will and will not be liable for. These will however need to be carefully drafted as there are a number of areas where liability cannot be limited or capped, particularly when dealing with consumers.
Intellectual property rights (IPR)
The intellectual property provisions should set out the ownership of each parties IPR and any IPR which might be created. If any third party IPR is being provided the terms should also set this out.
The terms should clearly set out the scope of the licenses, including when the licences will come to an end and any applicable licence restrictions.
The parties to the terms must consider what data (if any) will pass between them and ensure appropriate protections are included in respect of that, most importantly to ensure compliance with GDPR.
The above is not an exhaustive list but highlights a few fundamental considerations in respect of standard form terms and conditions and what general principles you need to cover in order to have clear and protective terms and conditions.
It is important that your terms and conditions or any terms and conditions which you enter into are clear and certain as to what has been agreed between the parties to minimise the risk of any disputes or misunderstanding as to what was agreed. It is particularly important to understand what the liabilities and obligations of your business are under the agreement.
For legal advice on commercial contracts, please contact the commercial team at Herrington Carmichael LLP using the details provided below.
This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.
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We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2020 by Legal 500 and Alistair McArthur is ranked in Chambers 2020.