HM Insights

Why proper terms and conditions in your contracts are even more important than ever

The coronavirus pandemic is affecting lives all over the world and it is not just people that are being affected. The global economy has been hit hard by the virus and that is why now more than ever it is vital that you ensure your business is in the best position to cope with the effects of COVID-19.

The government is providing a great deal of assistance for businesses, small and large, and as a business owner you should make yourself aware of all of that there is to assist. The Harper Macleod website is a great source of information with articles that explain the help being offered.
Check out our Coronavirus Legal Advice Hub 

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Protection for your business

The government funding is going to give a supporting hand to businesses, however thought should also be given to your terms and conditions. It may be easy to forget about these in light of everything that is going on but the terms and conditions you have in place were put there to give the business as much protection as possible and this point is even more important now.

You may have heard the term 'force majeure' being used a lot recently. This is a fairly standard term in commercial contracts but is very rarely used … until now! It is a clause which excuses a party from performing their obligations under the contract only when there has been a certain event or incidents which are beyond that party's reasonable control and prevent a party to the contract from fulfilling their obligations under the contract.

An event will qualify as a force majeure if it is beyond the reasonable control of the affected party; has prevented or hindered the performance of the contract obligations; and the non-performing party has taken all reasonable steps to avoid or mitigate the impact of the event. Typical examples include war, riots and natural disasters.

Have you considered whether your contracts make provision for force majeure clauses and whether the outbreak falls within the protection offered by the relevant clause? Having such a clause in your terms and conditions may well provide some contractual protection if you are unable to fulfil your contract. More information on this clause is available from our recent blog

In times like these everyone is looking to minimise cash expenditure. Trading on a well drafted set of terms and conditions can ensure that you receive payments that are due to you. For example, detailed payment terms, interest for late payment and other consequences for a failure to pay are all terms which can all be used to assist in recovering overdue payments.

Equally, you should be aware of your obligations to make payment in relation to any contracts you have entered. Have you checked the consequences of a failure to comply, including any rights by either party to terminate? These are clauses that you could use or could be used against you. It is important to remember that we will come out of this difficult period at some point in time and maintaining good relationships with your customers is key to getting back up and running, as they will hopefully still be your customers after this pandemic. You should therefore consider trying to mitigate your losses and work with your customers where possible.

Other aspects to consider are:

  • Is time of the essence;
  • What are your obligations under the terms and conditions;
  • In what circumstances are you liable to your customer and for how much; and
  • Is it possible for you to vary any terms?

Get in touch

As you can see there are a number of things to consider and you should always be aware of what is contained within your terms to ensure that you have robust provisions in place that you can rely on. Please get in contact with us and we can provide a free review of your terms and conditions to find out whether you or your customer's rights and/or obligations may be affected.

Useful links 

CORONAVIRUS LEGAL ADVICE HUB

CORPORATE LAW SERVICES

BUSINESS LAW AND CONTRACTS