You are an entrepreneur. You do business. Preferably with good customers, and with an eye on the long term. But sometimes things go wrong. The relationship sours, the handshake seems forgotten. Where does that leave you? Good agreements make good friends. But it is when you are no longer good friends that you need those good agreements the most. Enter: the general terms and conditions.
General terms and conditions?
General terms and conditions are written (standard) agreements. As a supplier of products – but certainly also of services – you impose them upon the other party without negotiating. The intention is that the general terms and conditions then apply as a contractual framework for the performance of those services or the delivery of goods to your customers.
Why bother? What is the importance of those general conditions?
A conflict is not what you hope for when doing business. But what if it does arise? Then the first step is to look at what agreements the parties have made: in this way, the conflict can be objectified in terms of the rights and obligations of both parties. To find out what binding agreements apply between the parties, it is best to look at the general terms and conditions.
As an entrepreneur, you are not obliged to draft or use general terms and conditions. However, the importance of good general terms and conditions in B2B relations can hardly be overestimated. With conclusive general terms and conditions you ensure the following quick wins:
- You determine the (game) rules yourself (for example: the limitation of liability, you have something up your sleeve if customers do not pay or pay late…);
- General terms and conditions create clarity in advance, so that you are more powerful in the event of legal conflicts;
- General terms and conditions save time: with clear general terms and conditions you don’t have to put energy into renegotiating contracts and following them up each time;
- Saving time also means saving costs;
- General terms and conditions, clearly tailored to your business, demonstrate professionalism.
Can you invoke your general terms and conditions just like that?
It is not because your general terms and conditions are on the back of your invoices that you can successfully invoke them. Your general terms and conditions do not apply ‘just like that’.
In order to be able to invoke your general terms and conditions, your customer must:
- have had the opportunity to become acquainted with your general terms and conditions and;
- have had the opportunity to do so before the agreement was made (and not only when he receives the invoice);
- have explicitly or tacitly accepted the general terms and conditions.
Whether these conditions are met depends on various factors. In any case, there is a difference between working in a B2B setting and working in a B2C context.
In B2B relations, it is more likely to be judged that the other party has accepted the general terms and conditions. For example, when they do not protest your invoice, or when they sign your quotation (with your general terms and conditions on the back).
To be able to invoke your general terms and conditions against consumers (in a B2C context), the bar is set higher. As an entrepreneur, you will have to be able to prove that the consumer has explicitly accepted the conditions.
One size fits all?
General terms and conditions exist in all shapes and sizes. Irrespective of the business in which you are active as a company, it seems important to regulate at least the following aspects in your general terms and conditions:
Scope of the conditions
General terms and conditions make clear in what circumstances they are applicable. For example, you can stipulate that your terms and conditions apply to offers and quotations, but also to any beginning of the execution of services or delivery of products.
You can also stipulate that the terms and conditions of the counterparty do not apply, even if those conditions state the opposite. Let hierbij wel op voor de “battle of the forms” (meer hierover in een afzonderlijke blog volgende week).
Duration and termination
The duration of your relationship with your customer is very essential, and part of your business proposal. Ideally, your general terms and conditions should therefore refer to the quotation as far as this part is concerned.
In addition, your general terms and conditions also determine how the customer can terminate the contract. It is a good idea to make a reservation in case the customer cancels early. After all, it is possible that as an entrepreneur, you have already made costs for the project with the customer, for example, by purchasing hardware from your external supplier. If the customer ‘lets you down’ at that point, you will want to recoup the costs incurred or ask for compensation.
Furthermore, it is at least as important for you, as an entrepreneur, to build in sufficient possibilities to get out from underneath an agreement. For example, in the event of a failure on the part of the customer and termination, in the event of bankruptcy of your customer,…
Price and price changes
Clarity about the object of the agreement and the price are essential. From a business point of view, but also legally as a basic condition to be able to speak of a valid contract.
In the context of ICT services, transparent pricing is not always a given: some projects are carried out at a fixed price, others on a T&M basis, or even on a combination of both.
In the case of long-term projects, it makes sense to build in a price-indexation mechanism. This indexation allows you, as an ICT supplier, to annually increase the prices that have been determined in the quotation. Please note: under Belgian law, this is subject to some restrictions, and it is particularly inappropriate to simply refer to a general index!
Furthermore, your general terms and conditions should also include a clause allowing you to pass on any external price increases. For instance, we are thinking of the external partner from whom you purchase the hardware to be used in your projects for customers.
In the general terms and conditions, you determine the period within which the customer must pay the invoices. The sooner, the better, but in any case, please note that the legislator has recently introduced strict rules regarding the maximum duration of the payment term.
Linked to this, it is important to build in sufficient ‘safeguards’ in case your client does not pay (on time). Think of the possibility of charging interest and damages.
It also makes sense to provide for the possibility of suspending the performance of your services until the outstanding invoices have been settled.
Obligation of means vs. obligation of result
When making agreements, it is important to distinguish between an obligation of means and an obligation of result.
In the case of an obligation of result, you commit yourself as a supplier (of services) to achieve certain results. If you do not achieve the promised result, you are in principle liable for non-fulfilment of that obligation. You can only escape this by proving, as the supplier, that you could not have remedied the situation, or even that you could not have foreseen it.
In the case of an obligation of means, the supplier undertakes to do his best to achieve a certain result. For example, in clauses of an obligation of means, you can read that the ICT supplier undertakes to deliver software ‘as described in the technical specifications’ but also that the supplier ‘will carry out the project in accordance with the most recent standards applicable in the sector’ or ‘in accordance with the rules of the art’. In that case, it is up to the dissatisfied customer to prove that, as a supplier, you have not made the efforts that can be expected of a professional party.
Limitation of liability
As an ICT supplier (just like other suppliers of goods or services), you may be forced to pay compensation to the client in the event of a breach of contract. In such a case, it is best not to give a “blank cheque” but to limit the compensation to the value of the contract, for example.
In addition, it is also a good idea to include a number of grounds for exclusion of liability: for example, you can exclude your liability if damage occurs when the customer combines the software you have supplied with software or hardware from an external supplier, or when the customer uses the software in a way or for an application for which it was not designed.
Prohibition of recruitment
Once a software programme has been written and delivered, it must of course be maintained. Who can do this better than the developer himself? It is tempting for the customer to hire your development staff after the completion of the project.
That is why it is advisable to include a clause in your general terms and conditions that prohibits such recruitment of your staff (both employees and consultants with whom you have a contract).
Customers often say: “I pay so I must have all the IP“. Be careful with this: if you transfer the delivered or developed software to the customer, you have lost it and cannot use it in other projects.
However, in many cases, transfer of IP is not necessary and the customer is sufficiently helped with a right of use/licence of the software. It is important, then, to delineate the scope of such a right of use sufficiently by including: whether the licence is exclusive or non-exclusive, for what period the licence is valid, whether the licence is free of charge or paying, and so on.
General terms and conditions tailored to your company? How do you start?
It is best not to draft general terms and conditions by copying a model from a competitor or by downloading it from the Internet. The risks of this approach are obvious but often ignored.
General terms and conditions can contain errors, are often outdated or sometimes lack essential provisions. But the most important argument for not simply copying terms and conditions is probably that the general terms and conditions of a competitor or other supplier are not, or not sufficiently, adapted to your specific business model or offer.
Professional support for drafting your general terms and conditions?
You do not have general terms and conditions yet? Or do you already have general terms and conditions but they need a thorough revision?
Do you want to know whether your current general terms and conditions still comply with the most recent legislation (such as the B2B legislation or the amended Act on Late Payments)? Do you want to know whether the current version of your general terms and conditions sufficiently protects you and/or is sufficiently tailored to your business?
Contact us for more information at firstname.lastname@example.org. Our team of specialists always starts from your concrete business case and can support you in drafting and/or reviewing conclusive general terms and conditions.
Written by Sarah Dello, Senior Legal Adviser deJuristen, and Kris Seyen, Partner deJuristen