Terms and conditions are legal contracts that govern the use of a service or product. They establish the terms of the relationship between the parties and mitigate against potential disputes.  

Terms and conditions are important to outline the rules and regulations around the use of a service or product. Businesses often put themselves at risk by not specifying that the terms form part of the contract. The enforceability of terms and conditions is regularly misunderstood, and they are not automatically legally binding. The success of a transaction depends on the agreements between parties. The content of these agreements will be subject to negotiation, which can give rise to the “battle of the forms”.

1. The importance of incorporation

Effectively incorporating a business’ terms and conditions into a contract is therefore necessary to ensure that a transaction will be successful. It is all the more important to incorporate terms and conditions into a contract as it provides a certain clarity and certainty in relation to the rights and obligations of the parties involved. With clear terms and conditions in a contract, there is less room for disputes.

When it comes to express and implied terms, incorporating terms and conditions allows parties to specify their goal. By doing so, the parties’ reliance on implied terms will be reduced.

2. Battle of the Forms

The battle of the forms will occur when two or more parties are looking to make a contract, and each party attempts to incorporate its own terms and conditions. The issue will be to determine which terms and conditions will govern the contract.

There are four different outcomes, depending on the circumstances:

• Last terms sent apply, which means that the last set of terms which was sent before acceptance or performance will apply. This is often referred to as the “last shot”.
• When other terms apply however, this means that the parties’ conduct together with documents passing between them only shows that other terms will prevail.
• No other terms will apply if neither party’s terms and conditions are incorporated.
• There will unfortunately be no contract if the parties cannot agree on the terms. Therefore, if something goes wrong, they will have to rely on the law of restitution for a remedy.

 Offer and Acceptance

When incorporating terms and conditions, parties essentially apply the principles of offer and acceptance. In exchanging the forms, parties are making offers and the terms which are accepted will form the binding contract. It is therefore crucial to have clearly drafted terms and conditions as the parties will be relying on it throughout the life of the contract.

Incorporating terms and conditions into contracts promotes clarity and provides a certainty to the parties which is crucial to business relationships. This allows for the parties to be bound by the terms of the contract. This is a way to reinforce the contractual relationship. It is therefore important to clearly define the terms for the parties to establish some sort of legal certainty which is required when entering into a business relationship.

Our Commercial team has a wide range of experience when it comes to drafting terms and conditions, as well as advising on incorporation techniques, and will be happy to assist your business with this process.

For further advice and assistance please contact our Commercial Solicitors on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Terms and Conditions of a business are the legal contract between a provider and customer for the supply of goods or services. This contract regulates the business relationship between the provider and customer by setting out the rights and responsibilities of each party.

It is often the case that businesses decide to put in place standard terms and conditions as it is a quicker and easier process. However, more often than not, it turns out that the terms do not cover every aspect of the business relationship and these gaps can cause unwanted dispute. It is therefore important for a business to ensure that the terms provided to the customer clearly and fairly cover all the elements of the relationship.

Key provisions

Although most agreements vary from one another depending on the goods or services provided, there will be key provisions that remain similar.

• A limitation of liability clause will allow for the parties to be protected against any breaches as well as establishing what would happen and limit a party’s exposure to liability should such breach occur. It is therefore important for such provision to be drafted in an unequivocal way.
• The term of the agreement should be clearly set out as well in order to determine whether the business relationship exists for a fixed term, and if so, the length of this business relationship.
• The consideration should also be a recurring provision between different terms and conditions. This would enable the parties to clearly lay out the consideration amount as well as the method of payment and what would happen in the event of late payment.
• Another important provision would be regarding data protection and compliance with GDPR regulations so both parties can agree the correct protocol to protect the data passed on between themselves.

The above is a non-exhaustive list of the provisions to consider and look out for when reviewing terms and conditions and it is therefore important for businesses to take legal advice when drafting terms and conditions or before signing said terms. Our Solicitors have a wide range of experience in advising businesses and dealing with drafting and negotiating terms and conditions in accordance with their client’s instructions so the contract is truly tailored to their needs. 

For further advice and assistance please contact our Commercial Solicitors on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Photo by Sora Shimazaki from Pexels

Retention of title clauses are found in most contracts for the sale of goods.  The concept of retention of title is a simple one whereby the supplier of goods seeks to protect itself against non-payment by retaining ownership of goods until payment is received from the customer.

What is retention of title?

The concept arises from the Sale of Goods Act 1979.  The Act provides that property in goods will only pass when the parties to the transaction intend it to pass, thus allowing a supplier to retain title to goods after delivery of those goods to the customer.  A supplier wishing to retain title to goods until payment is made must ensure that this intention is expressly stated in their terms and conditions with the customer; otherwise it is implied by the Act that title will pass on delivery.

Retention of title clauses can be a powerful weapon for suppliers.  This is particularly so where a customer enters into an insolvency process since generally they can be enforced against insolvency office-holders (such as liquidators) and hence can, in roundabout terms, improve a supplier’s position compared to other creditors of their customer (including secured ones).  This is because the goods will not form part of the customer’s insolvency estate.  In corporate insolvencies there is rarely enough money to pay all creditors and hence the opportunity to obtain goods back can be an effective remedy for a supplier.

Where should a retention of title clause be incorporated?

Although a relatively simple concept, in practice, many suppliers get retention of title wrong.  A common reason for this is a failure to properly incorporate the terms and conditions which contain retention of title clauses into a contractual relationship with a customer.  I have lost count of the number of suppliers I have seen who have simply referred to their terms and conditions in their invoices to customers and expect this to be sufficient.

Incorporation is a matter of contract law.  The most effective way of a supplier evidencing incorporation is by producing terms and conditions signed by the customer confirming its assent to the terms.  Other modes of incorporation include taking steps to give reasonable notice of the terms prior to the goods being supplied.  Retention of title clauses commonly fail where a supplier seeks to rely on terms and conditions referred to or printed on an invoice or delivery note, where no written contract was in place before the goods were supplied.  Invoices and delivery notes are generally viewed as post-contract documents, meaning before the supplier has offered to supply goods and the customer has accepted that offer. 

What to do next

Businesses supplying goods on credit would be well advised to take a close look at their standard terms and conditions to check that they include a valid retention of title clause.  They should then ensure that their contracting techniques validly incorporate these into contracts with customers.  This may well require sales staff to be advised on how to effectively achieve this.

If you require legal assistance regarding terms and conditions or insolvency, please do not hesitate to contact Christopher Buck, Associate Partner in our Business Services team, on 01908 660966 / 01604 828282 or by email at christopher.buck@franklins-sols.co.uk who will be happy to assist.

The United Kingdom along with the rest of the world is currently in unchartered territory. Extensive travel bans have been implemented, schools have been closed and the stock markets are in freefall with the FTSE 100 falling to levels not seen since the financial crisis.

It has become apparent that no government was adequately prepared for a pandemic of this nature and it is undeniable that the uncertainty is worrying for all sectors of the economy.

With that being said, it is inevitable that commercial contracts are being delayed so it is worthwhile taking the time to assess what your legal options are if you are unable to fulfil your contractual obligations.

A contract is a legally enforceable agreement that creates rights and obligations between those who agree to be bound by its terms, provided that certain key elements are present (namely, offer, acceptance, consideration, intention to create legal relations and certainty of terms).

Each party is entitled to expect the performance of a contract which has been agreed. If you terminate a contract without a common law or contractual right to do so, this would normally amount to repudiation, which in itself attracts significant consequences for the benefit of the ‘innocent party’. It is therefore pertinent to be aware of the two key exceptions to a breach of contract, these are force majeure and the common law doctrine of frustration, both of which are considered in turn below.

Force Majeure

Force Majeure is a phrase derived from French civil law which means ‘superior force’. You will find that most commercial contracts include an express force majeure clause tucked away at the back as it is not an automatic right. It is intended to suspend or terminate contractual obligations following the occurrence of certain events which are outside the parties’ reasonable control and that prevent them from performing their obligations. You will need to carefully asses the specific wording of the relevant clause, normally it will contain a non-exhaustive list of circumstances which would be deemed as a ‘force majeure event’ as there is no statutory or common law definition.

It is important to check whether a pandemic or epidemic is specifically covered as the World Health Organisation has recently declared that the outbreak of Covid-19 has reached pandemic levels. In the event that neither pandemic nor epidemic is listed it may be worth considering whether “any law or any action taken by a government or public authority” is included and indeed applicable instead, especially if the government move to enforce a mandatory lockdown.  In any event, it is likely that any counterparty will resist reliance on such a clause leading to the possibility of litigation.

In comparison, a short form force majeure clause would normally contain wording to the effect of “neither party shall be in breach of this agreement nor liable for delay in performing, or failure to perform, any of its obligations under this agreement if such delay or failure result from events, circumstances or causes beyond its reasonable control…..”. Obviously, this is a much wider definition and in the absence of a list of specified events, it means it is open to interpretation on whether this clause would extend to cover Covid-19.

Once it has been established that a force majeure event has occurred, causation also has to be established, i.e. that the outbreak of Covid-19 has prevented, hindered or delayed a party from performing any of its contractual obligations. If performance has only been made more difficult or expensive then the protection is unlikely to apply. A party seeking to rely on the force majeure clause should also be able to demonstrate the use of reasonable endeavours to mitigate any loss.

There may also be a process to follow in that the affected party has to serve notice on the other party within a certain number of days to notify them that a force majure event has occurred. Time is therefore potentially of the essence. 

If you can successfully establish that a force majure event has occurred the clause will typically provide that the parties’ obligations under the contract are suspended until the force majeure event ceases. At this point, the contract will be ‘resurrected’. Alternatively, you may find that a more commercially attractive option has been drafted which states that so long as the performance of your obligations are continuously prevented, hindered or delayed for a certain number of weeks or days the agreement may be terminated by both parties. In terms of costs, unless the clause specifically details recovery provisions the general position is that any costs incurred or payments made will not be recoverable.

Frustration

In the absence of an express force majeure clause in a commercial contract, the common law doctrine of frustration may assist a party who is unable to fulfil its contractual obligations. You would need to demonstrate that a frustrating event has occurred after the contract was formed which, due to no consequence of your own, has made it impossible for you to carry out your contractual obligations or that they have become radically different.

Whilst this may seem like an attractive alternative, each case will be assessed on its own merits and case law has shown that a very high threshold must be met before the court will deem that a contract is truly frustrated. This is so parties are not released from their contractual obligations too easily. Please note in the past it has been deemed that a contract is not frustrated where:-

• a force majeure clause in the agreement covers the situation instead (unless such clause is incomplete);
• the contract is more difficult or expensive to perform;
• there are changes in economic conditions; and
• the frustrating event should have been pre-empted or is due to the conduct of one of the parties.

These are only a few examples, but seem particularly relevant in the context of this article.

If a contract has been frustrated, all parties will be released from their future (not past) obligations immediately and the contract will be automatically brought to an end. Neither party may sue for breach. The allocation of loss is then decided by the Law Reform (Frustrated Contracts) Act 1943. Under the Act payments can be recovered in full or in part, in a manner deemed equitable by the courts.

Insurance

Finally, you should also check your business insurance or speak to your broker to see what risks are covered. Standard commercial insurance policies typically only provide cover against a wide range of day-to-day risks, therefore unless you have put specific cover in place which protects your business against interruption arising from a infectious disease or forced closure by the authorities it is unlikely that you will be able to make a claim. Even if your policy covers such perils you may find that a claim can only be made in relation to specific diseases named in the cover.

If you require legal assistance regarding contracts, please do not hesitate to contact Christopher Buck, Associate Partner in our Business Services team on 01908 660966 / 01604 828282 or at christopher.buck@franklins-sols.co.uk who will be happy to assist.