Essential Terms to Make Your Business Successful
The terms and conditions that your customers agree to may sometimes be overlooked, but legally they form a contract between your business and its customers. For this reason, they are the most important document for your business to be successful!
If you invest in legal advice, your terms and conditions are more likely to be enforceable and significantly reduce your exposure. However, if you don’t have the time or funds to invest in them now, you should at least include the following recommendations:
- Reduce Your Liability
Your terms and conditions should reduce the liability of your business and its employees. You can do this by either:
- Reducing the type of liability – this will include removing your liability for any damage or claim. However, you must be aware that these clauses will only work to the extent allowed by the law. For example, liability waivers for negligence are unlikely to be enforceable; or
- Reducing the quantum of liability – this will commonly reduce your liability to the amount your customer has paid for the goods or services. It can also exclude damage to third parties or loss of profit.
Often, the extent of these clauses can be reduced by the courts or found to be unenforceable altogether. To ensure that they are enforceable, always have your terms and conditions signed, and include the clause specific to your business.
An example of a simple liability waiver is:
“You agree to release and indemnify us from all damages, claims, demands and proceedings in connection with our engagement and these terms and conditions, whether arising from common law, equity or pursuant to statute or otherwise, in respect of any loss, death, injury, illness or damage.”
- Acknowledgements from Your Customer
Your terms and conditions will focus on your business and what you are offering. However, it is always helpful to include some acknowledgements or warranties for your customers to sign. These will help ensure your terms and conditions are enforceable and you can rely on them if any dispute arises in the future.
Warranties you should consider including are:
- An acknowledgement that the customer has read and understood the terms and conditions;
- An acknowledgement that the customer has obtained legal advice or had an opportunity to obtain legal advice before signing your terms and conditions;
- An acknowledgement that the person signing the terms and conditions has authority to do so;
- An acknowledgement that the customer is running its business in accordance with the law and is not insolvent;
- An acknowledgement that the customer is not currently in breach of the terms and conditions.
- Get a Personal Guarantee
A personal guarantee will apply to customers who are companies. Without a personal guarantee signed by a director of the company, your business will only be able to recover any debts from the company. This means that if the company is wound up, you won’t get paid.
Including a separate personal guarantee signed by one or two directors will mean that you can also recover any debts from them personally, and not just your corporate customer.
A very basic example of a personal guarantee is:
“I agree to unconditionally and irrevocably guarantee the due and punctual performance of the company’s obligations under the terms and conditions.”
- Charging Clause for Property
A charging clause will allow your business to put a charge over land owned by your customers, if your debts are not paid. This may sound like a drastic step to take, but without a charging clause, payment is dependent on the customer. So, if the customer doesn’t want to make payment, the only ‘threat’ is to go through traditional legal routes.
A charging clause will give your business the power to apply greater pressure and force payment. It will allow you to register your interest on the title of the client’s either real or personal property.
If pursued further, a charging clause can go so far as to force the sale of that property. This is a clause which can be included in the terms and conditions and doesn’t need to be signed separately.
An example of a charging clause is:
“You hereby charge to us all of your right, title and interest, whether legal or beneficial, in any piece of land owned by you or in which you have an interest and consent to the lodgment of a caveat or caveats noting our interest under this charge.”
- Protect Your Intellectual Property
A lot of your business’ assets comprise of its intellectual property. You need to protect this property and make sure that it is not distributed for free or without your consent. You should make sure it is clear that you own all of the intellectual property and the limited circumstances under which your work can be distributed.
An example of an intellectual property clause is:
“All copyright, trademark rights and other intellectual property rights in the goods or services belongs to us, unless otherwise indicated.
Other than for the purposes of and subject to the conditions prescribed under the Copyright Act 1968 (Cth) (or any other applicable legislation), or as otherwise provided for in this copyright notice, no part of any material, in any form or by any means (including electronic, mechanical, microcopying, photocopying or recording) be reproduced, adapted, stored in a retrieval system, transmitted or reproduced on any other internet website without our prior written permission.”
We recommend investing in your terms and conditions and ultimately, the success of your business. If you have any questions or would like help with your business’ terms and conditions, please get in touch with an experienced commercial lawyers at Taurus Legal Management on (03) 9481 2000 or info@tauruslawyers.com.au.