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Why use standard terms of sale?

Benefits

Standard terms of business offer certain advantages over bespoke agreements:

  • They avoid the time and expense of drawing up specific terms for each individual transaction.
  • They enable a company to introduce terms favourable to itself in a format that does not encourage heavy negotiation, for example, terms limiting the supplier’s liability (in the case of terms of sale) or extending the supplier’s liability (in the case of terms of purchase).
  • They provide certainty that the company will be trading on broadly consistent terms that comply with the company’s policies and procedures.
  • They allow for standardisation of a company’s contracting procedures, and for contracts to be handled and concluded by more junior staff.

Limitations

Although the benefits of using standard terms are substantial, their use is subject to certain legal and practical limitations:

  • There are greater restrictions on the extent to which a company is allowed to exclude or limit its liability where trading on standard terms that have not been individually negotiated or where the company is contracting with a consumer). Certain terms may be unenforceable altogether and others may be enforceable only if they satisfy special tests of reasonableness or fairness.
  • The standard terms must be incorporated into the contract between the supplier and the customer in order to be binding.
  • There is a danger of staff using the standard terms for transactions for which they are not appropriate. As a safeguard against this, companies can, for example, establish procedures where proposed contracts over a certain value are sent to the legal department for review before they are issued.
  • The use of standard terms cannot be relied on in place of commercial measures such as the maintenance of adequate credit or quality control procedures: they should be in addition to, rather than in substitution for, such measures.
  • Standard terms require regular review in order to ensure that they take account of legislative changes or new case law and reflect any changes in the business activities of the company.
  • A business may still need to have more than one set of standard terms if it provides a variety of significantly different goods (for example, off the shelf goods and bespoke goods).

For further information and a free quote, please contact our Corporate and Commercial team on 01604 609560 or email us at info@dfalaw.co.uk

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