With everything that’s going on in the world currently, it’s inevitable that, as people start tightening their spending, you will get clients that want to cancel. Reviewing contracts is something you need to add to your “to do” list. We’ve reviewed many contracts and terms and conditions in our time. The one clause that seems to be a real sticking point with many is the cancellation/termination clause.
Some are unnecessarily complicated, whilst others simply make no sense at all. This is the one clause you need to get right if you want to protect cash flow in your business. Having to argue with a client about what they interpret your cancellation terms to mean is not something you want to have to do. Especially if things have gone sour in the relationship. It’s so easy to avoid this if you have simple, clearly worded terms.
That is why reviewing contracts and terms & conditions is very important. You need to make sure you have a well-constructed contract with specific clauses which clarify the duties of each party. Having clear and fair terms will save you time, help prevent disputes and protect your business if something goes wrong.
So if your contracts span many years without revision, now it’s the perfect time to have them reviewed by a qualified and experienced lawyer.
Why is reviewing contracts important?
Even if you have just reviewed your contract, if there is new legislation, it’s always a good idea to review it again.
You need to understand the questions being asked when reviewing the contract, and every line is essential and requires review. This can include anything from how the contract is formed to whether it still applies to the goods or services you are providing.
Pay special attention to terms like payment, confidentiality, cancellation/termination, and dispute resolution. These are worth spending extra time reviewing to ensure that all the parties involved are on the same page.
Cancellation terms when selling to consumers
If you are selling goods or services to consumers, then, by law, your cancellation terms need to be reasonable. For instance, if you use a term that says no refund available in any circumstances, that is likely unfair. If you end the contract and the customer has nothing to do with it, the customer has a right to a refund.
However, you still have to protect yourself in the event your customer cancels, and it’s not your fault. It just has to be reasonable and not excessive.
Business to business
The Consumer Rights Act (2015), which sets the rules regarding the supply of service in a business-to-consumer contract (B2C), doesn’t apply to a business-to-business contract. (B2B). It is the Sale of Goods Act 1979 that harmonises the rules for business-to-business (B2B) contracts.
On a business-to-business footing, the terms around cancellation and termination can be stricter. However, they still need to be with fairness in mind unless you want to completely put people off working with you. Still, they need to be in a clear language to save any dispute when it comes to relying on the clause.
Final thoughts
Have you reviewed your contract or terms & conditions recently? Now is a really good time to do a review as we head into rocky waters in terms of the economy. With inflation through the roof, many businesses are tightening their belts when it comes to payment and cancellation terms.
It’s equally important to get a professional eye on any contract or terms you are entering into as a business. Even if the contract seems pretty straightforward, a good lawyer can identify any legal risks that the contract may contain.
Don’t hesitate to contact us if you have any questions when you decide to review contracts.