Does you need terms and conditions for product use, services, your websites, or other parts of your small business operations? Often, the answer is yes.
Here's why. Terms and conditions can help you protect your business in lawsuits. They can also discourage behaviors between your employees and your customers that could damage your business's strength, stability, or reputation.
There are a few important steps to take before drafting your terms and conditions. First, learn what you'll need to include. Second, study the mistakes you must avoid. And finally, determine when and how you should create this important document. This article will help you get started.
But first…
Please note that this article contains common industry practices and not professional legal advice. Further, this article does not create an attorney-client relationship. It should not be considered a substitute for attaining an attorney’s advice.
What are terms and conditions?
Terms and conditions (T&C) are part of a contract you form with another person. Many businesses create them when working with customers to provide details of the exchange, recourses both parties have for nonperformance, and other essential details that protect both parties.
Tell me more about why terms and conditions matter for a small business.
Expertly crafted terms and conditions help your small business in four important ways:
- They clarify the agreement you and your customers are making. This can help to set expectations, build confidence in the transaction, and prevent many common disputes.
- They help you ensure that important topics are covered, such as limiting your liability, describing terms of use, and ensuring your intellectual property is properly protected.
- They're key to protecting your business and your rights.
- They make the agreement much easier to enforce.
What should my terms and conditions include?
Terms and conditions documents often include the following categories. However, the categories you need—and the specifics of each section—should be discussed with an experienced attorney.
Introduction
Terms and conditions often begin in a standard way. They include a paragraph informing the customer or reader that the document they're viewing is a terms and conditions agreement and that by signing or accepting, they consent to adhere to the terms.
Definition
T&C documents should describe the two parties involved in the transaction and assure that both have the legal capacity to enter into an agreement. Documents should also describe the scope of the transaction (often, what is being sold).
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It isn't always necessary to list every item a customer may purchase through your contract. Instead, you could refer to a brochure or catalog or a list of services on your entity’s website. |
Duration
Duration is an important piece of the T&C document. Be sure to include this section, and within it, these pieces of information:
- The effective date of the contract
- The length of the contract (or the time by which you’ll complete the work)
- The renewal options that will be provided
- The termination notices your customers must provide to cancel the contract before its set completion date
Price
When it comes to pricing, you have two options. You can state the current price of the good or service, or you can refer to a separate price list for current pricing information. With either option, try to cover these key points:
- Your discount structure
- How and in what circumstances prices may change
- How notice of price changes will be provided
- Whether price increases will allow the customer to nullify the contract
Address taxes, surcharges, shipping fees, returned payment fees, restocking fees, and other fees in this section, too.
Payment
Include a section on payment, and within it, these important points:
- The payment process
- The payment schedule
- Acceptable forms of payment
- Fees or penalties that may be incurred for late payment or default
Procedure
Provide details on the steps you will follow to procure, produce, and/or deliver the good or service to your customer. The steps provided in terms and conditions are usually limited to those that won’t change over time. However, they may include whether or when subcontractors could be used and how the performance of third parties will be monitored. You might consider providing more information about your process on your website.
If there are roles and responsibilities your customer must fulfill, you can provide them in this section, too.
Provisions on carriage and delivery
In this section, you'll describe how goods will be transported and provided to your customer. Some key points to cover include the rights, responsibilities, liabilities, and immunities assigned to both parties. You may also discuss the insurance protection your business has put into place.
Change orders
You might include a section to cover how the contract will be impacted by change requests. Key topics often include the procedure for making change requests and a caution that those requests will impact the budget and timeline of performance.
Cancellations
Your document may include the process a customer must complete to cancel an executed contract. Here, you might mention some of the following important points:
- Timeframes in which cancellations can occur
- The notice you’ll require
- Fees the customer will incur
- The portions of payment that may (or may not) be refunded to the customer
Dormancy
If your contract is one that will be performed over a period of time and requires customer inputs for performance, consider adding clauses to ensure the customer keeps the project on pace. Some owners specify what will happen to projects that go dormant for 30, 60, or 90 days, which may include cancellation, additional fees, or the recovery of expenses.
Warranties
If you plan to include product or service warranties, include the following pieces of information:
- The coverage you provide
- The timeframe in which you're offering coverage
- The events that must occur for customers to become eligible for repairs, replacements, or recoveries of costs or damages
Limitations of liability
You might include terms that limit the damages your business will cover in specifically defined events. These events could include product or service failure, defects, inadequacies, or other factors that are relevant to your business and offerings. You might also want to specify that you are not responsible for downtime, fit for purpose, or other specific, difficult-to-assure factors.
Errors and omissions
Consider including an errors and omissions statement. Here, you could state your company cannot be sued in any of these circumstances:
- When you or your business makes an error
- When you fail to complete certain actions (such as reviewing content or inputs your customers provide)
- For delays that may cause damages for your client or other parties
Rights and protections
Be sure to include provisions that ensure your business, its practices, and its intellectual property are protected. Here's what you might include:
- A confidentiality clause
- Terms on the use and ownership of intellectual property and data
- Provisions that are relevant to your unique business context
Data protection and privacy
You may include terms that define the kinds of records you'll store, how you'll use and protect your customer’s data, how you'll dispose of the records and data points after your contract has terminated, and the steps you will take in the event of a data breach.
Depending on your jurisdiction, you might need to share your business’s privacy policy (which is essential for businesses that collect personal data) or refer to relevant data privacy and protection laws and affirm your intent to comply.
Indemnity
Your document may define when and how your customer will need to pay you for defined losses and expenses.
Assignments
You could include terms that describe whether the agreement is transferrable upon the sale of your business or the customer’s business and the rights and obligations you'll adhere to through the transfer.
Consumer protections
You'll likely include terms that offer your customers the protections they're afforded under federal, state, and local law for refunds, cancellations, and other key terms.
Contingency provisions
You may want to include language defining how you'll resume operations in the event of a defined disaster. You could also share any off-site practices you’ve implemented to restore operations with minimal downtime.
Dispute resolution
Be sure to include a section describing how customers should raise concerns and seek recourse. Here, you'll state your preference for mediation, arbitration, or litigation, and if litigation is selected, the court in which cases may be heard.
Termination
If you're establishing an ongoing contract with a customer, be sure to include these key pieces of information:
- The contract’s end date
- Instances in which the contract can be terminated early (which may include breaches of the terms and conditions provided)
- Early termination fees (which may include recovery of losses)
- Property and other rights your business can reclaim upon termination
Contact information
Most T&C agreements provide at least two ways for customers to contact the entity. Here, you might provide an email address, mailing address, phone number, fax number, or another contact method for your agreement.
Agreement
Importantly, make sure there is a means for your customer to agree to your terms. You could require your customers to sign and return a contract with these terms or read and check a box on your website confirming their agreement.
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Many business websites allow for “implied consent” by stating that the use of products or services signifies that users agree to a business’s published terms and conditions.
However, owners are now encouraged to attain “express consent.” You can do this by having your customers complete an action, such as signing an agreement or indicating consent through a checkbox, to affirm their agreement before signing up for or using a service. |
Be sure to cover every topic in plain English (rather than legalese) to ensure that your customers understand, specifically, what they’re agreeing to. Provide definitions where needed and avoid acronyms and abbreviations whenever possible.
When should I form the terms and conditions for my small business?
Ideally, you’ll form your terms and conditions when you’re drafting the other documents you need to form your small business.
But if your business is already up and running and doesn’t have terms and conditions in place, move this task to the top of your to-do list.
How can I create my terms and conditions?
Too often, owners copy terms and conditions from other websites. But in doing so, they’re failing to ensure that those terms are relevant, sound, and enforceable for their business and jurisdiction.
Here's why. It can be tough for people without a law background to determine whether another business’s terms and conditions are replications or are cobbled together components of various other T&C documents. And it’s certainly difficult to understand whether that entity’s legal terms will do anything to help your business.
Some sites, such as termly.io, TermsFeed, and LawDepot, allow you to create simple terms and conditions online using standard legal language. However, it’s best to work with an attorney who specializes in business terms and conditions formation and can ensure the language protects your business to the fullest possible extent.
Would you like to connect with an attorney who can help you with this task? Start here:
How do I share my terms and conditions?
If your sales take place in person, you can provide physical copies of your terms and conditions to customers beginning the buying process or completing purchase orders. In some cases, you can post it in a conspicuous place in your store location. Talk to an attorney to establish the best practice for your business.
If your sales occur online, you might display your terms and conditions in one of the following places:
- The footer of your website
- As links within other agreements (such as your privacy policy)
- On login/signup prompt pages
- On the checkout page of your site
What should I do if a prospect disagrees with some of my terms?
A lawyer would tell you to refuse to do business with people or entities who won’t accept your terms.
But, sometimes, it's ok to adjust your terms, especially for a strategically important customer. Of course, you should certainly run any changes or revisions past your attorney—and ensure you can meet them—before agreeing.
What should I do next?
Contact an attorney start this important task. Then, log into your owner’s portal for articles that will help you work through the actions you need to take to start, manage, and grow your business.
