by Tom Pickwell, Trainee Solicitor
Most of us are guilty when it comes to seeing the box that says ‘I confirm I have read and agree to the terms and conditions’, of simply clicking it without paying much attention to it. However when doing it on behalf of a Local Authority, Education Institution or other company should we be wearier? The simple answer is ‘yes’. Whilst we get some protection ourselves as individuals from the Unfair Terms in Consumer Contract Regulations, there is less protection when acting on behalf of a business. In this article, some of the particularly onerous and dangerous clauses will be looked at as well as ways to protect ourselves and our businesses.
What actually are Terms and Conditions?
Terms and Conditions are the things that we agree to do and not to do when entering into some sort or agreement or contract. Whilst some of these will be very simple such as agreeing to pay the purchase price when we buy something, some terms are much less clear. Particular caution should be given to these as we may be binding our businesses into something that we don’t fully understand.
The Auto-Renewal Clause
This clause is mainly found in subscription or service based agreements and contracts, and can often be hard to spot. It may come under a duration, termination or other heading rather than on its own. This clause works as a type of ‘rolling contract’, and effectively starts a new contract after the previous one ends. Common terms may be that if the contract is not terminated 90 days before a certain date, it shall run again for the same amount of time as the original one.
The danger of this is that if you miss the date to terminate the contract, you are likely to be locked in again and have to pay up. It is therefore worth making a list of important dates of contracts and agreements when entering into them. Having a note of when to terminate and when the contract ends will ensure that you do not accidentally lock yourself in to something you don’t really want again.
The Penalty Clause
You may recall a previous article discussing penalty clauses in employment agency contracts in some detail and the same principles apply here. Often found around cancellation and termination clauses, a penalty clause is when a party has to pay a fee for doing something that is more than the cost of the loss.
If for example a contract to supply goods for the value of £100 has a clause stating that if the delivery is one hour late, a fee of £1000 shall be payable, the penalty appears to be more than a relative and reasonable foreseeable loss. The courts have recently however taken a more lenient approach and allows for some penalty clauses when the clause is ‘commercially acceptable’.
When wanting to get out of or end an agreement or contract, this clause will state how to do it and how long it will take. Sometimes termination can take place by simply writing to the other party to let them know and that’s it, but often there will be notice periods that have to be given first and sometimes costs that have to be paid when terminating. Understanding this clause is therefore very important as getting out of something might not be anywhere near as easy as it was to get in.
Even after an agreement or contract has ended, there may still be things that have to be done or things that cannot be done. A common example of this type of clause is a restraint of trade clause. This may be that after providing services to a company to do something, you are not allowed to offer the same services to another company within 100 miles for 3 years. Knowing and understanding how these restraints work and if they are enforceable is vital in making sure that you are not faced with big costs or being preventing from working even after you think the agreement or contract has ended.
From all of the examples given above, it is clear that there are a lot of traps in agreements and contracts that can have potentially severe financial consequences. When entering into agreements and contracts, it may be worth first checking with a solicitor or in house legal team before doing so. The small cost of spending some time double checking could save a lot more in the future!
If you are a public sector client and would like your contracts or agreements reviewed, drafted or even have a dispute, then contact the team at NWL Legal who will be happy to help.