Thinking About Standard Terms and Conditions
Companies that regularly contract business will usually develop a set of preferred terms that they use to kick off negotiations, and they call those their “standard terms and conditions.”
The first thing to keep in mind when reviewing standard terms and conditions is that there’s no such thing as standard terms and conditions. That is, there is no objective standard for business contracts. A company’s “standard T&Cs” are just a form written by the company for its own convenience and advantage. So, sucker, if someone hands you a wad of gobbledygook and tries to sell you with a casual reassurance like, “this is just a standard contract we need you to sign,” you can remember to remember what I just said: There are no standard terms and conditions!
When your company is thinking of streamlining operations by standardizing your purchase or sales terms, the first thing to keep in mind is that there are no standard terms and conditions. That is, your company’s standard T&Cs should be a custom form written by you and your lawyer to serve your own convenience and advantage.
Companies can have good standard terms and bad standard terms. Here are some general characteristics of good standard terms:
The contract conforms to the way the company actually does business and addresses the company’s actual business goals and concerns. That is, it fits the way the company quotes, performs, and invoices or pays for its contractual obligations.
The contract is reasonable and expresses the reality of the company’s negotiating power in its industry. Generally an efficient standard contract should feel really smooth and easy to swallow for the other side, even while it draws firm lines protecting the proffering company’s interests.
The company’s business team actually understands what the contract says, understands what kinds of terms they can reasonably negotiate themselves, and understands when to refer negotiations to the company’s lawyer.
The scope of the contract is clearly defined. An objective third party (like a judge) should reasonably be able to understand what the seller has agreed to provide and what the seller has not agreed to provide, and when one side or the other has breached.
The pricing and payment schedule tracks the scope and progress of the work.
The contract addresses reasonably foreseeable problems and difficulties: typical issues like changes, delay, cancellation, indemnity, insurance, warranties, dispute resolution; and the actual concerns of the company based on its priorities and experiences.
The company will know it’s a good standard form when it gives the company more control over its business relationships and creates efficiencies in the work flow.
I really like working with companies to develop standard T&Cs. I like to learn about the way the company works and to write a contract that makes things better for the company. I ask questions like, how do you actually do that?; what comes first over here?; what’s the worst thing that can happen at this stage?; how will you deal if this part gets messed up? Then I consider what the general character and tone of the contract should be and start an outline; then I review a series of reference contracts to see if anyone’s been doing a better job than me; then I write a draft for my client’s review and revision; and then we make adjustments so it’s an excellent and efficient tool that’s appropriate and easy for the company to use.
I also really like structuring contracts with a client’s UX in mind. It’s fun to figure out how to set up the format so that it’s really intuitive for my client to use. Usually that means separating the business and legal issues by breaking out a section where the client can just focus on developing the proposed scope and price quote without tripping over the fine print. Sometimes it means formatting my work to fit a particular client management software or platform; sometimes it means developing a modular form where the client can swap out different exhibits or sections depending on what kind of job or client they’re proposing the work to. It’s fun for me because I am confident that I can write a contract that the client will review and say, that’s great!
Taking the time to develop standard terms also helps the company analyze and review its own processes and priorities, and often leads to adjustments in business operations so the company can best manage its interests and risks.