Avoiding business disputes: Make sure your business terms are enforceable

Business disputes are expensive, often eye wateringly so, but fortunately they are also for the most part avoidable.

If your business is facing a claim, your contract will be the first document a lawyer will consider when advising on whether there is a good case against your business. A clear, well drafted set of terms covering the potential areas of dispute is often enough to avoid a claim. A good lawyer will, however, spot any unenforceable terms without much difficulty.

It’s therefore vital to keep your standard terms of business up to date, particularly when legislation and court decisions alter the legal landscape, which they frequently do. An old set of contracts or an agreement ‘borrowed’ from a competitor can be as dangerous for a business as a set of badly drafted terms.

There are also other issues which seem particularly to trip up businesses when disputes arise:

Limiting your liability

Limiting the amount you pay if your business makes a mistake is an attractive reason to have a contract in the first place. However, go too far with your limits and your protections may become entirely unenforceable. Standard terms and conditions which are not negotiated must be ‘reasonable’ even when trading with other businesses and few, if any limitations will be permitted when dealing with consumers.

You must also be clear to state expressly that your terms do not seek to exclude claims which cannot by law be excluded (such as death or personal injury arising caused by your business’ negligence).

Dealing with consumers

For the most part, you can be fairly robust in your terms of business when dealing with other businesses. When trading with consumers a raft of legislative protections means that you have to be far more even handed in your approach. Businesses often mistakenly use the same set of terms for both businesses and consumers, which either leaves them with too few protections or clauses which cannot be enforced. It is therefore important that your terms are correctly tailored towards your particular client base.

Incorporating your terms

Once a deal is concluded, you should as a matter of course confirm, preferably in writing, that the agreement is subject to your terms of business. Order forms, websites and email confirmations should refer to and include your terms of business. If dealing with another business, it is always best to make it clear that your terms are agreed over those of the other party (unless that cannot be agreed commercially).

Most importantly, you should be alive to any legal changes which require an amendment to your terms of business. Keeping yourself up to date may be a challenge, but it is a vital exercise if you wish to avoid trading on a set of unenforceable terms.