It might not be the most riveting part of starting an online business but when it comes to ensuring you get paid and do not encounter a cash flow crisis, defining robust terms and conditions that you can rely on to resolve such issues are vital.
Your terms and conditions set out how you trade. If you fail to invest in clear policies, terms and boundaries for your business, others will do it for you. A classic example is that some companies have a 60-day payment policy on invoices (in industries such as construction, 90 days is common).Â For many start-ups and SMEs, terms such as these can cripple their cash flow and cause untold sleepless nights.
This is where your terms and conditions can protect you.
If under your terms of trade, you require payment within 30 days, you may be in a position to negotiate with the client. If they won’t talk, you can walk so long as you have the courage to abide by your own policies.
Terms and conditions will vary depending on the type of business you have as well as the industry and jurisdiction you are trading in. It is, therefore, dangerous to simply copy someone else’s terms and conditions and use them as your own this is an all too common mistake, often borne out of an effort to reduce costs in the setup phase. Don’t do it.
Failing to establish clear terms and conditions puts you at risk of uncertainty and misunderstandings, which can lead not only to cash flow dilemmas but disgruntled customers and suppliers and even, in the worst-case scenario, legal action against you. Although some of the key terms and conditions in many policies may seem very similar, they care not. They are actually tailored for the requirements of the business to which they belong. What works for one business, won’t always work for another.
So what should be included in an online business terms and conditions?
Below is a handy checklist of some of the items you may wish to cover off when drafting up your terms and conditions.
Information about your product / service and company
You need to set out the details of your company, including its name, address, phone numbers, company registration number, VAT number (if you are registered) and email address as a standard requirement. If you are acting on behalf of a third party, make sure you include their full contact details and make your relationship unambiguous.
Information about your product or service should also be clearly defined, to avoid any confusion over the type of product or service you can provide to consumers.
If you are selling goods online, you should make prices clear. If the price for a particular product does not include VAT, make sure you are transparent about it and you clearly identify the VAT component of the item or service.
If a consumer is required to pay extra for delivery or installation, then include this information in your terms and conditions. Also, set out your methods of payments and how long a customer has to settle an invoice.
Pricing errors can cost a business dearly, so include steps in your terms and conditions to ensure you are not bound by any mistakes.
Returns, refunds and cancellations
Under the Consumer Contracts Regulations, consumers who buy online have the right to return goods within 14 days in exchange for a full refund. If the goods are faulty, a customer can return them within six months in exchange for a full refund.
You can choose to extend these statutory rights through your terms and conditions but you cannot reduce the rights of the consumer.
By setting out the returns, refunds and cancellation rights of your customers in your terms and conditions, you are demonstrating that you take your compliance responsibilities seriously and you are familiar with consumer legislation. It also gives you a reference point if someone approaches you demanding a full refund outside the six months limitation period when the remedies available are in fact replacement or repair of the goods.
After sales support
If your business provides after sales support, make sure you provide details within your terms and conditions. This will protect you from customers who demand free and ongoing support for years after the initial purchase was made.
Online privacy and the cookie law
To protect yourself, your customers and suppliers, it is a good idea to set out your Data Protection Act 1998 compliance policies and procedures. This should include details of how a person can request details regarding the information you hold about them and the measures you take to ensure data about customers and suppliers is secure.
It is also wise to add a term referring to your compliance with what is known as the Cookie Law, privacy legislation that requires websites to obtain permission from users to store or retrieve any information on a computer, smartphone or tablet.
The law is aimed at protecting online privacy by making consumers aware of how information about them is collected and used online and give them a choice to permit or refuse it.
The above is in no way an exhaustive list of what you may want to include in your terms and conditions. Every business and its customers are unique, which is why it is crucial that you seek legal advice when drafting the terms and conditions for your online store.
Investing money into proper terms and conditions right from the outset could save you thousands in legal fees and lost productivity, should a dispute between you and a consumer or supplier develop due to even the smallest ambiguity.
Saracens Solicitors is a multi-service law firm based opposite London Marble Arch. We have dedicated and highly experienced commercial law specialists who can assist you with any questions you have regarding getting your terms and conditions right. For more information, please call our office on 020 3588 3500.