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Contract terms and conditions provide the backbone to any commercial transaction and are absolutely essential to protect you and your business. Yet many sole traders and small business owners go diving in without any contractual protection in place.
Today more and more people are operating home-based businesses as contractors or freelance workers, yet it is easy to fall into the mistake of thinking that terms and conditions are only applicable to big business. Here we take a look at the important aspects that contractual terms need to cover and the dangers of performing work without a contract.
What are terms and conditions for?
Your contract sets out the rights and obligations of each party. In its most basic terms, that means you have the obligation to provide the agreed product or service, and you have the right to receive payment for it. On the flip side, your customer has the right to receive these goods or services and is obliged to pay you.
This all sounds simple enough, but of course this covers a variety of aspects. Here are just a few:
- Exactly what will you provide? Are there any stipulations about when you will provide it, or minimum quality levels?
- How much will you be paid, when and by what means?
- What happens if there is a problem with the product or service?
- Who is responsible for insurance?
- What if someone is hurt or something is damaged while you are performing the work?
- Is this an ongoing business relationship? If so, for how long, and what if either party wishes to exit it?
- What is the agreed process to resolve any disputes that arise?
What could go wrong?
The most obvious ramification of performing work without a contract is that you will have very little to fall back on if the customer does not pay you. Evidently you cannot sue them for breach of contract if there is no contract in place.
However, if something really unfortunate goes wrong, then without a contract in place, not getting paid could be the least of your worries. Indemnity and liability clauses set out who is responsible for what in the event of any losses being incurred by either party. It is critically important to set these out, particularly if you are anywhere near your customer’s property.
For example, suppose an IT consultant agrees to set up and maintain an ecommerce website, but makes some error, resulting in the site being offline for several days. Without terms and conditions in place, the client could claim for business interruption, loss of business, damage to reputation and all sorts of other things.
Commercial claims can destroy a small business, so terms and conditions are the first line of defence in mitigating this critical business risk. Browse our range of template legal agreements containing business terms and conditions for a wide range of purposes.
