Commercial Contracts

It is important for trading businesses that supply goods or services to have trading terms because these define the obligations of the business and limit its liability should things go wrong.

The terms should take account of whether the business is supplying other businesses or consumers, or both.

Selling to consumers, particularly through the internet, is highly regulated, and provisions which may be appropriate in a business-to-business context may be unlawful and ineffective in the case of a consumer customer.

The terms and conditions of sale or purchase should be prepared for the business, rather than an off the shelf contract, or even copied from another business. This is crucial, because if the terms do not reflect how the company’s business is actually carried out and its sales processes, there is a real risk these terms will not be effectively incorporated into the contract.

Many important provisions in the terms of business that relate to seeking directly or indirectly to limit the business’s liability, may only be effective to the extent that they are “reasonable”. This is especially risky, because what is “reasonable” depends very much on the individual circumstances, and so will vary from case to case.

In addition to having terms of sale, businesses should also consider having terms of purchase, for one main reason – avoiding conflicting contracts and confusion.

Where a supplier has terms of sale and a customer has terms of purchase, the two sets of terms are likely to clash, raising into question which applies to the contract. The terms of purchase contract can be used to specify and determine what is provided and also the circumstances and other contractual documents and processes.