We regularly take calls from small businesses that have either:
- Written their own terms and conditions; or
- Cut and pasted bits and pieces from the terms and conditions of a competitor.
We like to give bonus points to bush lawyers who have energetically applied both of these methods.
On one hand, at least these companies have a written contract, which is more than many small businesses can say. On the other, nothing says “unprofessional” like pages of irrelevant or rambling conditions littered with inconsistent definitions, random numbering and a variety of party names.
Is my DIY contract worth the paper it’s printed on?
We’ve said it before, but a written contract is essential for several risk management reasons, including:
- Permanently recording what the parties have agreed;
- Managing both parties’ expectations about the precise nature and price of the service or product to be provided;
- Setting out what will happen if the parties’ circumstances (and therefore expectations) change; and
- Capturing a process for managing the relationship (e.g. resolving disputes or bringing the relationship to an end).
If your T&Cs adequately meet each of these requirements, give yourself a gold star. However, DIY contracts often do not satisfactorily manage risk. Worse, they sometimes lack one or more of the legal elements of an enforceable contract. This might mean that they can’t be relied upon to force payment of the bill, even if all of the agreed work has been completed.
What are the most important terms I should include in a commercial contract?
We think the investment of $750 – $1500 for a basic tailored contract template is a very worthwhile spend from any company’s risk management budget. But we know that many businesses will continue to attempt to write their own contracts. If this is you, here are 5 critical terms that we recommend you include:
- A confirmed, written scope of the services or works to be performed and a program for completion.
- Acceptable payment terms (e.g. frequency of invoicing, time for payment).
- A variation clause that requires variations to services to be confirmed in writing, and provides for an adjustment to the fee (including a process for agreeing its value).
- A contractual limitation of liability proportionate to the services being provided and the commercial return for those services.
- A clause that contemplates what will happen if the relationship breaks down or must be brought to an end earlier than planned (e.g. if the other party becomes insolvent).
Bonus tip – what not to include
At SoundLegal we are firmly in favour of plain English drafting. One dead giveaway of DIY contracts is that they tend to be chock full of pseudo-legal and/or redundant words like “shall”, “the said”, “herein”, “aforesaid” and “inter alia”. We call these words “legal gibberish” because they are apt to confuse, mislead or introduce unnecessary ambiguity – none of which are desirable attributes for a business contract. If you must write your own contract, please don’t try to disguise its amateur status by throwing in a lot of multi-syllabic words and long, tortured sentences. No one will be fooled and worse, you might end up placing your business at greater risk.
Could your time be put to better use?
Another thing we’re in favour of in business is outsourcing tedious tasks to a specialist. It’s invariably more cost-effective than you spending hours fossicking through “contract law for dummies”. You will also end up with a clear, concise and professional product that covers your risk while accurately representing your brand.
I actually think I did a bang-up job of my DIY T&Cs – will SoundLegal give them the once-over just to check?
We will, but in our experience reviewing DIY T&Cs tends to take longer and be less cost-effective than tailoring a fresh template from scratch.
LET US HELP
Get in touch with us today if you require assistance drafting or revising a contract template for your business.
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