Terms and conditions are a risk management tool and an allocation of roles and responsibilities
Terms and conditions are important to protect businesses and to make it clear what a customer is signing up to. The existence of terms and conditions in our daily lives is inescapable, they outline the way goods and services are provided and accepted. For example terms and conditions will describe what is being provided to the consumer, payment details, time frames, return/refund policies, warranties and disclaimers. You may not notice, but terms and conditions are everywhere, on the bottom of online shopping sites, on signs before we enter into car parks, a waiver before go-karting, attached to quotes, or a in the form of a box to be ticked saying ‘I have read and accept the terms’ before we can buy a concert ticket online. Irrespective of the size of your business it is extremely important to have well thought out terms and conditions when conducting transactions and that fit seamlessly with the way you conduct business. It is also critical that terms and conditions cover off risks to you and your business and are not considered unfair contracts under the new unfair contracts regime.
The importance of timing your terms and conditions right
It is crucial to provide your terms and conditions to a customer before you start providing any goods or services to that customer. This has been a fundamental feature of contract law for decades, the case of MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 8 ALR 131 stated that a purchaser must be afforded a ‘reasonable opportunity’ to either accept or reject the terms and conditions of purchase. It is not generally sufficient to provide a client or purchaser with a copy of your terms and conditions after the agreement has been entered into or after you have started providing goods and services to that customer. With this in mind, your business should set out the expectations of the transaction from the beginning in order to be afforded maximum protections.
Your terms and conditions are essentially an allocation of risk between you and your customer and a risk protection tool.
Tip: ensure that your customers read and understand your terms and conditions
A business should make their terms and conditions easily accessible and obvious. It is wise to include the terms and conditions at the start of the document, with the signing section to follow – this helps ensure the customer has the opportunity to read and consider the terms and conditions before signing.
Ideally, the way you structure your terms and conditions should make it difficult for a customer to argue that they were unaware of the terms because they didn’t read them. This happened in the case of Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 where a party attempted to argue they could not be bound to the terms and conditions of the contract as they did not read them. The provisions were on the reverse page of the agreement and despite being on the reverse, the party was held to have accepted them upon signing the document.
However, be careful that the terms and conditions are not underemphasised on purpose. The case of Director of Consumer Affairs Victoria v Domain Register Pty Ltd [2007] FCA 1603 held that the small and difficult font outlining where the terms and conditions were to be viewed was a direct attempt to give important information no prominence for commercial gain.
How might I incorporate terms and conditions to online purchases or online services?
Generally, there are two ways in which you can include your terms and conditions online.
- “Click Wrap Agreement”
This technique of acceptance requires a consumer to click on a button to the effect of “I agree” or tick a box saying something similar. The terms and conditions will usually be accessible through another link. In eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768 it was agreed that “click wrap” was an effective way to convey terms and conditions. However, this method of agreement has been a controversial one in Australia and overseas as the judgments have considered all the relevant facts in making a determination as to whether the agreement to the terms and conditions was validated by the click.
- “Browse Wrap Agreement”
On a website there may be a link to the terms and conditions displayed somewhere on the website, often the bottom of the page, and require clicking a hyperlink to view them. In these situations, there is no requirement to click on an “I agree” type button but contrastingly, the consumer may not even be aware of the terms and conditions. The courts have typically been less likely to enforce agreements made through the “browse wrap” display technique as the notice to consumers has not been made obvious.
What are the essential inclusions for my terms and conditions?
Your specific individual terms and conditions will vary depending on the services offered and the nature of the transactions. It is important to tailor your terms and conditions to the way you supply the service or product and not to copy and paste from a competitor, particularly given you do not have ownership or any rights to use or change the terms and conditions of a competitor.
Some essential inclusions for your business might include:
- The goods or services: What is the customer receiving? What is its purpose, function or use?
- Payment terms: It should be clear when you will be paid. Is it before or after the product or service is provided? How many days do they have to pay? Is there a deposit required?
- Additional costs, fees or disbursements: In what circumstances will the customer incur an additional fee, cost or disbursements?
- Time frames: When will the product/service be provided to the customer? What happens if the deadline is missed?
- Intellectual property: If applicable, it is crucial to state who owns what intellectual property to avoid transferring any rights to it.
- Warranties: What are you warranting? How long is the product or service good for its purpose? What if the product or service is defective or faulty?
- Returns and refunds: What is the process for returning a product or obtaining a refund? Your process will need to comply with Australian Consumer Law.
- Termination: How can the agreement be ended? Is there a time frame or expiry date? Who can end the agreement and when? What are the consequences of termination?
- Dispute resolution: What is the process for dealing with a dispute if it arises?
- Indemnities and liability: If something goes wrong, who is liable for what? Which party is on the hook for certain acts, claims, consequences, damages and costs?
- Confidentiality: What elements of the agreement are confidential and cannot be disclosed to other people?
It is also important to know what you cannot include. The Australian Consumer Law provides a set of consumer guarantees, which cannot be altered or excluded by any terms or conditions. Some of the guarantees include:
- Guarantee as to acceptable quality;
- Guarantee as to fitness for a particular purpose;
- Guarantee as to due care and skill;
- Guarantee as to reasonable time for supply;
Any terms and conditions which attempt to alter any of the guarantees found in the Australian Consumer Law will not be valid.
The unfair contracts regime which was extended on and from November 2016 has also impacted on the types of terms that cannot be included. For example, many terms and conditions would state that the party supplying the goods or services could unilaterally change the terms of the agreement without giving the other party notice or the opportunity to terminate the agreement. This is now unacceptable and could result in the terms and conditions being determined an unfair contract.
The use and inclusion of terms and conditions in your transactions and agreements are essential to safeguard your business and make it clear what the consumer can expect. At Coutts Lawyers & Conveyancers, we are able to prepare tailored terms and conditions, which will take into account the individuality of your particular business. We can ensure you are complying with the law but ensuring the terms and conditions have the look and feel of your business and are plain language and friendly. Please do not hesitate to contact our experienced team to enquire about amending or obtaining terms and conditions for your business.
