In your small business, it’s absolutely vital that your customers know clearly what they are purchasing and what your terms of business are. This is especially important if you operate online.
What are terms and conditions (T&Cs) and how important are they?
These are the clauses in a contract that set out the rights and obligations that both parties need to be aware of when they enter into a contract.
In the past, a big mistake which businesses have made is believing that, if they hide their terms from the customer but the customer still signs the contract, that these terms can be relied upon – i.e. if the terms of the contract are part of the “small print”, the belief is that once the customer signs the contract, whether or not they have seen or read the terms, that they will be bound.
Can terms forming part of the ‘small print’ be relied upon?
Largely, the answer to that is no.
Bring T&Cs to the customer’s attention
Nearly 80 years ago, way back in 1940, there was a landmark case in the courts about whether a local authority could rely on a disclaimer (against personal injury) on the back of a ticket given to a customer who hired a deck chair. The courts made the point that in order to rely on this, such a disclaimer would have to be brought to the customer’s notice at the time the contract was being made. In this case it wasn’t, since the customer only received the ticket after he paid the money. Therefore, it was a receipt and, consequently, the disclaimer could not be relied on since it had not been brought to the customer’s notice before the contract was made, enabling him to pull out if he wanted. One of the judges in that case commented that if the attendant had mentioned the disclaimer to the deck-chair hirer, before he handed over the money, then possibly the disclaimer would have been activated and could be relied on.
It is the same with regard to T&Cs. They must be brought to the customer’s attention before anything is signed, and the only way to do this is to ensure that they are clear and available to be read and, in addition, they should be highlighted.
It may be as simple as creating a tick box for the customer to check before signing anything. That tick box may state that “I the undersigned have read the terms and conditions and am happy to proceed”, and if online, then a link to the T&Cs on the website will ensure compliance.
As a small business, it’s important to draft T&Cs that reflect the business requirements, and there should be no ambiguity. If badly drafted, customers may interpret them in a different way to what was originally intended. This is not an exact science in that sometimes it takes a few mistakes to ensure that what you have expressed in your T&Cs is relevant and necessary. Therefore, it becomes a matter of being precise and succinct so that there can be no misunderstandings.
Be simple with terminology and don’t use legal jargon since very few people know what this means. The more the language is complicated, the more likely that an individual will not bother to read it, and this may encourage them not to proceed. Conversely, if there is a tick box to say they agree to them, and they tick the box, then it may well be legally binding whether or not they have actually read them.
Some terms may be general, for example, confidentiality, intellectual property, disclaimers or limiting liability – and in such cases, precedent clauses (i.e. pre-written, “off the shelf” wording) can be used. Other, more specific terms and conditions can be tailored to fit a particular website or business; you can write these yourself, look at other T&Cs online, or you may want to engage expert legal help from a solicitor or paralegal.
What to do if a customer complains about T&Cs
If a customer complains that they were unaware of a term in the contract and the customer has ticked a box to state that they have read the T&Cs and agree to them then, unless the term relied upon is legally unenforceable or “unreasonable”, the customer will not have much recourse. If, however, he/she decides to pursue the point, then the burden will be on the customer to provide evidence that it is unenforceable or unreasonable in the circumstances.
Every business should have a complaints procedure available online, and the first step that a customer should take is to follow this. From a business’s viewpoint, it is always best to try to resolve the customer’s issues before it is taken further. Once a complaint is made, for the sake of business reputation, it should be adequately dealt with at this early stage.
Whether or not the business decides to acquiesce to the wishes of the customer is up to the individual business. However, it may be best to consider whether or not there are grounds for the complaint. For example, perhaps the reason for complaint is indeed because the term in question is ambiguous and could be misinterpreted. If so, this is a good opportunity to revisit the T&Cs and tighten them up.
Keeping an eye on legalities
At this point, if legal expertise is required to cast an eye over the T&Cs, then it may be a good idea to use the services of a specialist paralegal who can offer advice and assistance at a reasonable cost.
A paralegal would also be able to give advice on whether or not a term or condition is legal and enforceable. For example, many businesses try to restrict or limit their liability should something go wrong.
A small dry-cleaning business, for instance, may want to prevent paying out compensation and any extra damages for an article of clothing which has been damaged during cleaning. The question to ask is whether or not a term in their T&Cs could restrict such a liability e.g. would it be enforceable?
The answer would be yes if (a) the term restricting liability was brought to the attention of the customer at the time they were discussing the contract and before payment or any ticket was issued. For example, having a big notice on the wall in the shop, and drawing the customer’s attention to it, may suffice.
Alternatively, the dry cleaner assistant could verbally mention the term, and (b) it is “reasonable” to rely on the restriction bearing in mind the nature of the business and the circumstances. What is “reasonable” cannot be defined but if the situation was disputed to the extent that it gets to court, then it will be for the court to decide whether or not it would be reasonable for the dry cleaner to rely on it in all the circumstances.
There are a few T&Cs that can never be relied upon because they are simply illegal and unenforceable. These relate to restricting liability for personal injury or death. Restricting or limiting liability in any other situation, in any business, will depend very much on the above two points.
How to protect your business
Every business should have clear, unambiguous T&Cs that have been drafted to reflect the specific requirements of the company. They should also be considered “reasonable” – and they must be made clear to the purchaser before they buy. By following these simple rules, businesses can protect themselves with T&Cs that are legally binding.
Amanda Hamilton is chief executive of the National Association of Licenced Paralegals (NALP)