Terms and conditions are seemingly everywhere. Often when you buy or sign up for something online, you are asked to tick a box that says you have read the terms and conditions. Our guess is that most people don’t actually read the T’s & C’s – probably because they are usually long and can be complicated.
This article will set out some key things to look out for before accepting someone’s terms and conditions. Likewise, if you’re a business owner, this article will list some things you might like to consider including in your terms and conditions.
For consumers
Your ability to terminate
If you are signing up to an ongoing service, such as a subscription or membership, it is worth having a look at your termination rights:
- Are you locked in for a minimum time or can you terminate whenever you want to?
- Are there any fees for terminating?
- How much notice do you have to give to terminate?
- Can you pause your membership? (For example if you are going on holidays or become sick or injured.)
Additional charges
You should check whether the terms and conditions give the business a right to charge you extra on top of the advertised fee. For example, you might think you are signing up for a $10 per month service, but there could be hidden additional fees such as administration or travel fees.
Payment obligations
Another thing to look at is your payment obligations, for example:
- How long do you have after receiving an invoice to make payment? Or is it a direct debit?
- Can you ask for a payment plan if you’re in financial hardship?
- What happens if you don’t make a payment on time?
- Does interest accrue on late payments?
- Can the business terminate the agreement if you don’t make a payment on time?
- Can they report you to a credit reporting agency if you are late to pay. This could affect your credit rating?
- Are the fees inclusive or exclusive of GST?
- Does the business have a right to increase your fees?
Variations
We also recommend that you check whether there is any ability for either you or the business to vary your agreement, and if so, what the process is. For example, you may have signed up for a premium package and later decide you want to downgrade to a more affordable option – can that happen?
Exclusions and limitations of liability
Terms and conditions will usually have a clause that excludes and/or limits the business’ liability. Often it will say that the business will not be liable for any loss or damage the consumer suffers unless it was due to the business’ negligence. It will often limit liability to the value of the goods or services purchased.
Warranties or guarantees as to results
Often terms and conditions say that the business is not guaranteeing any particular outcome from the use of their product or services. This means that if you sign up for something that you expect a certain result from (e.g. improved fitness, increased sales, healthier hair, etc.) if the business has said they do not guarantee any particular result, then you will not have any means to seek compensation from them if you do not obtain your desired result. However, if the business does not deliver the product or services they said they would deliver, then you may have options to seek compensation.
Dispute resolution
Terms and conditions will usually have a clause that sets out the steps to be taken if a dispute arises. Therefore, if you become unhappy with anything the business has (or hasn’t) done, it is worth checking the dispute resolution section of the terms and conditions to see what steps to take.
For business owners
We often prepare terms and conditions for businesses and/or review their current terms and conditions. Below are some things that might be relevant to include in your terms and conditions.
Security
If you are leasing products to your customers, or if you are selling particularly valuable products with deferred payment, it’s a good idea to include some sort of security in your terms and conditions in case your customer doesn’t pay.
You can include a right to register on the Personal Property Security Register, which means you would have a registered interest over the goods. If your customer doesn’t pay, you can get the goods back and if your customer goes into liquidation and hasn’t paid you, you will be first in the line of creditors in relation to those goods.
You could also include a right to put a caveat over your customer’s house if they do not pay you.
Payment obligations
It is worth while setting clear expectations in relation to payment terms. Refer to our section above about payment obligations for some examples of terms you should consider including.
Termination and/or default
It’s a good idea to include a clause about termination and defaults by your customer. You should set out when and how the parties can terminate the agreement and what will happen if your customer defaults on any term of the agreement.
Intellectual property
Depending on what your business is, it may be relevant to include a clause about intellectual property in your terms and conditions. For example, if you create or invent any materials, systems or processes and your customer will have access to that information, then it’s best practise to ensure that the intellectual property relating to your materials stays with you and your customer simply has a licence to use them.
Force majeure
A Force majeure clause will relieve the parties of their obligations if an unforeseeable event arises that makes the performance of their obligations impossible or unreasonably difficult. Often, force majeure clauses include events like natural disasters, war, strikes, government intervention and pandemics.
At Lynn & Brown lawyers, we have a team of commercial lawyers who have experience in reviewing and preparing terms and conditions. If you would like us to review terms and conditions before you sign them or if you would like us to look over your current terms and conditions, or prepare new ones, don’t hesitate to get in touch.
About the authors: This article has been co-authored by Chelsea McNeill and Steven Brown. Chelsea is a lawyer that graduated from Murdoch University. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
