How to Stress-Test Your Standard Terms and Conditions

Most businesses have standard terms and conditions, but far fewer have terms that will stand up when problems arise. There is a big difference between terms that look professional and terms that work when a customer refuses to pay, a supplier delivers faulty goods, or a dispute develops.

Here are some practical steps to help you review and strengthen your terms and conditions.

Are Your Terms Actually Part of the Contract?

Before considering what your terms say, ask whether they form part of the contract at all.

Under English law, terms generally need to be brought to the other party’s attention before or when the contract is made. If this does not happen, enforcing them can be difficult.

Common issues include:

Sending terms after an order has been accepted.
Referring to terms without making them easy to access.
Failing to obtain confirmation that the other party has accepted them.
Using contracts where it is unclear which version of the terms applies

You should also consider the “battle of the forms”. If both parties have their own standard terms, which set applies? A clear clause dealing with this issue can help avoid uncertainty.

Are Your Liability Clauses Enforceable?

Limitation and exclusion clauses are often some of the most important parts of any contract.

However, the law places restrictions on what businesses can exclude or limit. Some exclusions are not enforceable at all, while others must be reasonable and fair.

Ask Yourself:

Does your liability cap reflect the actual risks of the contract?
Are the clauses balanced, or do they heavily favour one side?
Could any provision be considered unfair or unreasonable?

If a court considers a clause unfair, it may refuse to enforce it.

Review Your Payment Terms

Payment provisions often look fine until a customer fails to pay.

Consider the Following:

Do your terms allow you to charge interest on late payments?
Can you suspend work or services if payment is overdue?
Do the terms deal with set-off rights clearly?
Is there a process for handling disputed invoices without delaying payment of undisputed amounts?

Well-drafted payment clauses can improve cash flow and reduce the risk of lengthy disputes.

Check Your Termination Rights

Many contracts allow termination for a “material breach” but do not explain what that means. This can lead to arguments when one party wants to end the contract.

Your terms should clearly address:

How much notice must be given.
Whether the other party has a chance to fix the problem.
What happens to outstanding orders, deposits, or work in progress.
Which obligations continue after termination, such as confidentiality provisions.

Clear termination provisions help reduce uncertainty and protect both parties if a relationship breaks down.

Think About Enforcement

Even well-written terms have limited value if they are difficult to enforce in practice.

When reviewing your terms, consider:

Whether you regularly deal with customers who may face financial difficulties.
Whether retention of title clauses or personal guarantees may be appropriate.
Whether your terms encourage disputes to be resolved quickly and commercially.
Whether they allow recovery of legal costs where appropriate.

Regular Reviews Are Essential

The best time to review your terms and conditions is before a dispute arises. A detailed review can reveal weaknesses that may not be obvious during a quick read-through. If your terms have not been reviewed for several years, or your business has changed significantly, it may be time to update them.

If you would like advice on reviewing or updating your standard terms and conditions, please contact our Corporate and Commercial team for practical, tailored advice.

James Bowles

Senior Associate