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5 Reasons Why Terms and Conditions For Businesses are Critical and More than Just Boring Fine Print

5 Reasons Why Terms and Conditions For Businesses are Critical and More than Just Boring Fine Print

Running a business these days is challenging enough without being let down by the fine print on your important forms such as invoices. The terms and conditions a business includes on documents such as invoices and quotes with detail on such important things as delivery terms, returns and refunds, payments, warranties, and limitation of liability are important to get right at the outset. Ambiguity or loopholes in these terms can open avenues for unnecessary and time-consuming red tape and, potentially, costly legal action.

Seeking the advice and guidance of legal professionals with experience in writing important commercial documents is vital to minimise the likelihood of problems with customers and clients later on. This article sets out five of the most significant reasons for taking the time to ensure a business’s terms and conditions are well drafted.

1. Defining the scope of the business-client relationship

Terms and conditions help define the key aspects of the relationship between a business and its customers to ensure there is clarity and transparency about the expectations and obligations of both parties. For a business, this ‘fine print’ should cover the products or services it will provide; the timeframe in which the goods or services will be provided; and the means by which the goods and services will be provided. Clear definition of the scope of the relationship, including when a binding contract between the parties is formed and when responsibility passes to the customer, avoids later misunderstandings and disputes.

The details of the business should also be clearly marked, including its ABN or ACN number for tax and GST components.

2. The importance of delivery terms

Expanding on the first point, a regular area of dispute between businesses and their customers is when and how goods and services are delivered, which party is responsible for the costs of delivery, and what the policy is when certain goods and services are not supplied, are delayed, or are damaged. These terms should be clear, concise, and fair to both the business and the customer.

Common delivery terms will specify shipping methods, estimated delivery times, shipping fees, and international delivery options. It’s also crucial for businesses to consider Australia’s vast geographical expanse when developing these terms, as delivery times can vary significantly between urban and remote areas.

3. The policy on returns and refunds

Returns and refunds is a frequent area of dispute between businesses and their customers, requiring terms and conditions that clearly state the policy under which customers can return products and request refunds. This includes specifying timeframes, acceptable reasons for returns, and any associated costs.

In Australia, consumers have rights protected by the Australian Consumer Law (ACL), which include guarantees of acceptable quality, fit for a particular purpose, match the description of the product or service, and match any sample or demonstration. Consumers have the right to return goods that do not meet these guarantees. Your terms and conditions should align with these legal requirements and clearly outline the process for customers to exercise their rights. Some businesses may also include a ‘30-day’ policy in their terms and conditions, allowing customers to return goods they are not satisfied with even if there is no fault.

4. The importance of payment terms

It could be argued that for a business, payment terms are the highest priority to get right when drafting terms and conditions. They dictate how and when customers are expected to pay for products or services. It is important to be transparent about payment methods accepted, due dates, consequences for late or missed payments (such as penalty payments) and any fees associated with specific payment methods. Details on whether prices are inclusive of GST and other taxes, and whether the business can charge interest and legal costs for the recovery of outstanding payments should also be included. Additional conditions may deal with entitlements to a discount or other reward for consumers.

For online transactions, cybersecurity is a significant concern. Businesses should assure customers that their payment information is handled securely. If a business collects and stores customer payment information, it must inform customers about its data handling practices.

5. Warranties, limited liability and other relevant terms

Warranties are promises made by businesses about the quality and performance of their products or services, and what should happen if things go wrong. These warranties can be explicit or implied by law. In Australia, warranties are governed by the ACL, and businesses must ensure that their terms and conditions align with these consumer guarantees.

Explicit warranties offered by the business should be clearly defined in the terms and conditions, including the duration and the process for making a warranty claim. It’s crucial for Australian businesses to understand the ACL’s requirements and limitations regarding warranties, which can vary based on the type of goods or services offered.

Limitation of liability clauses protect a business from legal jeopardy caused by certain acts, particularly where a business’s goods and services may involve an element of risk or where delays are likely. These clauses can help protect your business from excessive financial exposure in case of disputes or legal claims. By agreeing to the terms and conditions, the client or customer acknowledges risk and, generally speaking, gives up their right to sue the business.

Under the ACL, businesses cannot exclude or limit their liability for consumer guarantees. Nevertheless, limitation of liability clauses can still be useful in defining the scope of the seller’s responsibilities and liabilities in other aspects of the business. For example, the clause can specify the extent to which the business will be responsible for direct damages, indirect damages, or third-party claims.

Consult our expert team

Covering off all the elements discussed in this article in properly drafted terms and conditions is a crucial part of a business’s operations. By getting these important details right sooner rather than later, the legal risk that comes with disputes can be greatly minimised. Here at PD Law, our expert team of legal professionals we can help draft these terms and conditions with you to ensure they’re compliant with the law while providing you the best possible protection.