In this Blog post, we discuss Terms & Conditions – you know, those pesky, tiny-font forms that buyers often sign or click through when purchasing goods or services.   Sometimes T&Cs are attached to a Purchase Order (PO) or Statement of Work (SOW), sometimes they are provided to a party in paper copy or email, and other times they are simply housed on a party's website and deemed approved once the counterparty has clicked a link or agreed to proceed with the transaction.

Parties often view T&Cs as a mere routine nuisance when transacting for goods or services.   Often, parties sign or click through T&Cs without much care, and without carefully reading or understanding what they are agreeing to.   

However, it's important for parties to recognize that once signed, clicked through, or otherwise deemed accepted, T&Cs constitute a valid and binding contract.  

Moreover, though most sellers won't tell you this, the terms contained in T&Cs are often negotiable, just like any other proposed contract term.

Before signing, clicking through, or accepting Terms & Conditions, a savvy party should always read the T&Cs and, where applicable, negotiate them with the counterparty.   

The following are some of the important T&C terms which parties should carefully read, understand, negotiate, and re-draft where applicable:

1.  Scope Of Project

T&Cs must accurately describe the scope of the project, whether it's a description of goods or services being purchased.   The scope of the project goes to the very heart of the transaction and therefore must be accurate and comprehensive.

2.  Warranty

Buyer should carefully review the warranty (if any) set forth in the T&Cs, to ensure it is acceptable.   This may include the duration and scope of the warranty,  warranty exclusions and limitations, and the process for making a warranty claim.

3.  Indemnification

The parties should ensure that the indemnification requirements are acceptable.  Indemnification provisions can vary widely and can be very tricky to understand.   Using a qualified business attorney is essential to ensure that the parties are obtaining suitable and broad indemnification rights.

4.  Limitation Of Liability

T&Cs often include a limitation on the seller's liability.   Buyers need to review this to ensure they are comfortable with it, or seek to remove (or at least increase) the seller's liability limitation where appropriate.   From a seller's perspective, a low cap is always preferable.  

5.  Incoterms/Shipping terms

T&Cs may include “incoterms” or shipping terms.   Again, this is a highly technical area of the law where a few simple words in the T&Cs can have substantial financial, risk, and legal implications.   This relates to items such as responsibility for shipping charges, taxes, customs, risk of loss during transit, and insurance coverage requirements.

6.  Price and Payment Terms

The parties must ensure that they agree with the stated purchase price and payment terms.  For example, the buyer should understand whether payment is due upon invoicing, on a net 30 basis, net 60 basis, etc.   

7.  Time for Performance.   

T&Cs often include milestones or timeframes for performance.   The parties need to ensure that the time for performance and delivery specified in the T&Cs is acceptable.

8.  Choice of Law And Dispute Resolution

T&Cs, like most other contracts, typically include provisions which address how disputes are to be resolved, including forum selection, process, and governing law.  Its important for the parties to understand these terms and negotiate them where appropriate.

9.  Confidentiality

T&Cs may contain confidentiality obligations, depending on the nature of the agreement.  The parties must ensure that their relevant team members understand and comply with these requirements.  Sometimes T&Cs also include non-solicitation and non-disparagement provisions.  Again, these are items to review, understand, and negotiate where applicable.

10.  Intellectual Property

If applicable, T&Cs may define who owns the related intellectual property rights associate with the goods or services in question, and may include parameters governing the parties' use of such IP. This should be reviewed and negotiated where applicable to meet the parties' needs.

11.  Term and Termination Rights

T&Cs may include a specified term, and may include termination rights, including the consequences of termination.    In some cases, T&Cs may include an auto-renewal clause and/or advance notification requirements for termination.   These provisions can be a trap for the unwary, and need to be reviewed and clearly understood by the parties.  

12.  Force Majeure

T&Cs may include a force majeure provision.  Force majeure clauses in contracts have  become a greater focus since the Covid-19 pandemic. A force majeure provision gives the parties the right to extend performance deadlines, or even terminate the agreement, in the event of an occurrence which is beyond the reasonable control of the parties.  The details of a force majeure clause will vary, and each party's careful review and understanding is important.  

13.  Exclusivity and Fulfillment Requirements 

The parties should review and confirm whether the T&Cs include any exclusivity provisions.   Similarly, the T&Cs should be reviewed to understand whether they contain requirement/fulfillment obligations of either party.   These types of provisions can be extremely burdensome, and can have a significant impact on the project's pricing and on a party's ability to procure more favorable terms from third parties.  

14.  Service Levels

If there are specified service level commitments from either party to the T&Cs, these should be clearly described in the T&Cs, including the process for elevating issues, enforcement, and consequences for noncompliance. 

Incorporation by Reference to Online T&Cs

It is not uncommon for one party to have the other party click through a link to accept T&Cs.   This is a valid approach and is generally binding to the same extent as a party's manual execution of a paper or digital copy of the T&Cs.  Thus, in this situation, it's important for the applicable party to follow the link, review the counterparty's  online T&Cs and propose and draft edits before final sign-off, just as they would on a paper or digital copy.   More and more sellers are following the online T&C approach, because sellers know that buyers are less likely to focus on the T&Cs or seek to negotiate terms in a streamlined click-through approach.   Don't fall for that trick.  Instead, review the online T&Cs and provide comments before clicking through to acceptance, just you would a paper copy, again focusing on the material terms such as those outlined above. 

Merger Clause

Most contracts  - T&Cs included – include what is known as a merger clause.   Here, we are not talking about an M&A merger concept.  Rather, a merger clause in this context generally provides that once executed or approved, the agreement in question supersedes all prior verbal and written agreements of the parties relating to the same subject matter.   

Thus, in the context of T&Cs, it's important for parties to recognize that any prior verbal or written commitments or promises made by the counterparty will not be enforceable unless expressly included in the T&Cs.   Generally speaking, if the applicable term or provision is not included in the T&Cs, it's likely not binding  on the parties - even if previously discussed or promised.

Conclusion

Parties should take the time to carefully review and negotiate T&Cs before signing or accepting them.   T&Cs constitute a contract and can have significant financial, operational, and legal implications to the parties and their transaction. The Law Office of Jennifer M. Settles assists parties in negotiating T&Cs, creating T&C base forms, and prepares and reviews other forms of commercial contracts.  Contact us today to discuss, at 602-617-3938, or through our website, at www.jsettleslaw.com  The initial consultation is always free.

Jennifer M. Settles, Esq. is a corporate lawyer with the Law Office of Jennifer M. Settles.   She advises clients on corporate governance matters, M&A transactions, commercial contracts, real estate matters, financing transactions and more.  To schedule a free consultation with Jennifer, please call 602-617-3938, or email us through the  Contact Form on our website, www.jsettleslaw.com.