In my November 2018 blog article, one of the 6 key Legal Tips I listed was to “Put it in Writing”. This article tells you why having great Terms and Conditions documented is so important.
When starting up a business, the last thing you want to think about is the worst case scenario but if you don’t put terms and conditions into writing you put yourself at risk of uncertainty and misunderstandings. You need to cover yourself.
Your Business Transparency
Having terms and conditions protects your business but other parties such as customers also need to know where they stand in dealing with you. Terms and conditions have a vital role to play when it comes to two parties (customer/supplier, partners) understanding their duties, rights, roles and responsibilities.
Terms and conditions can save a lot of money by addressing all issues at the outset. This in turn avoids disputes later on about what might or might not have been agreed. Apart from the cost, disputes damage business relationships and your valuable reputation.
What To Include In Terms And Conditions
Well-drafted terms should act like a manual for doing business and provide absolute clarity on what should happen in a given situation. They should set out what the agreed terms are between parties and what happens if things go wrong or one party wants to leave or is unable to continue.
The exact items your terms and conditions should include depend on your individual business but you should consider including:
Many businesses include their terms and conditions on the back of their invoice, but arguably by then, it’s too late. Payment Terms can certainly be re-stated on an invoice but Terms and Conditions should be provided at the outset of a business relationship. This can be done in a fairly brief, easy to adapt, format. It’s also a good idea to display your general terms and conditions on your website.
What Happens If Terms And Conditions Are Not Clear?
Failing to specify terms can have a serious impact on your cashflow and your business relationships. You may end up in a situation where the customer thinks they will pay at the end of service delivery and you think you are being paid at the beginning or in stages, so you could end up having to pay for materials and staff before you have received the money from the customer. Another common example is a misunderstanding can occur as to what is being supplied and when.
Also, if you do not specify your payment terms very clearly, customers may be confused as to when payment is due or you have will have no right to charge interest for late payment.
One Size Does Not Fit All
It’s important to make sure your terms are specifically written for your business – you can’t assume another business will have the same needs as yours.
Consult a lawyer and avoid the temptation to copy someone else’s terms as their business is different and they may not have consulted a lawyer themselves. Consider it an investment. If well drawn in the beginning, terms and conditions should need very little modification as time goes by.
4 Tips For Working Out What You Need To Include In Your Terms And Conditions
When in doubt, seek help. Ask for advice from your mentor, fellow business owners, your accountant and your lawyer.
What if basic Terms and Conditions are not enough?
Most businesses will be able to get by with short form standard contracts (Terms and Conditions) for the supply of goods and services. However, in some cases it may be preferable to have a more detailed and traditional contract in place. A lawyer will be able to advise you what would be the best approach for your business.
These Questions and Answers reveal 10 Very Good Reasons you should have a Will.
1. Who decides what happens to your assets?
If you die without a valid Will, your estate is divided up according to the law and you will have no say in how it is distributed. A Will is a legally binding document, especially if it is written correctly, and it lets you say how you want your estate to be dealt with upon your death. Having a valid Will helps to minimize family fights about your estate, because it clearly spells out “Who What and When” for your Estate.
2. Who will raise your children?
By making a Will you have a say in who will take care of your children. Without a Will, the Court may take it upon itself to choose among family members or a government appointed guardian and there may be no regard to your views about those family members.
3. Who will control your Estate?
With a Will, you get to decide who will control (administer) your Estate. You can choose the person or institution you think will be most likely to responsibly follow your instructions without applying their own preferences. Because Executors play the biggest role in the administration of your Estate, you’ll want to be sure to appoint someone who is honest, trustworthy, and organized. This may not always be a family member!)
4. How long will it take to administer your Estate?
A professionally prepared and valid Will greatly assists the cost-efficient administration of your Estate and the early distribution of your assets to the beneficiaries named in your Will. Most estates will need to go through a process of being proven by the Court (Probate). Having a Will speeds up this process. When you die without a valid Will, the Court makes the decision who will administer your Estate and how to divide your Estate without any input from you. This can cause expensive delays.
5. What if you want to exclude someone from receiving a benefit from your Estate?
Most people don’t realise that they can exclude beneficiaries or give unequal amounts to beneficiaries. It might be as simple as a loan or gift being taken into account. It’s really important to have a professionally prepared Will if that is your intention. Also, if you want to protect what you give a beneficiary, that provision needs to be in a Will, or in alternative documents you can prepare when you are doing your Will. It’s a complicated area and it certainly pays to get this right.
6. What if you want to make donations to charities?
There is only one binding way to make a bequest to a charity upon your death and that is by having that bequest written into a Will. Again, gifting to charities in your Will can be complicated and you should talk this through with a professional.
7. How can you avoid legal challenges to your Will?
For a start, if you don’t have a Will you have no protection against challenges against your Estate. Preparing a valid Will with professional advice increases the protection your beneficiaries have. Wills can be challenged but most valid well written Wills are not – it’s as simple as that.
8. What do you do if your circumstances change?
Well, circumstances do change. Life changes such as births deaths, marriage, and divorce all create situations where having a Will and changing that Will are essential. Wills should be reviewed regularly – depending on what is happening in your life – as regularly as every year to every three years. Don’t invest in preparing a Will and then leave it in the back of a cupboard.
9. What will your defacto partner be entitled if you die?
If you die without a Will your defacto partner may not be automatically entitled to any of your Estate. He or she may stand to lose all of the assets and treasured mementos you want them to have.
10. Does having a Will mean your intended beneficiaries are provided for?
Not necessarily. It depends very much on how your assets are structured and owned. If you prepare your Will with the advice of a solicitor you will be able to review all of your estate planning needs including appropriate arrangements for your incapacity, and a review of your business succession, as well as any trusts. life insurance and superannuation.
Over my years as a lawyer, I have spent quite a number of those years helping clients as a litigator. But I found that there were many parts of the litigation business which seemed to be unhelpful and dissatisfying to clients (and me!!)
These dissatisfaction points included:
But fortunately those times have changed, and over the past years I have shaped my practice more and more towards "Preventative Law".
I think of Preventative Law as a kinder, gentler law practice, where my role as a lawyer is more as an educator, coach and resource to my clients. I often talk to people about Preventative Law but I am not always sure that people understand what it is that I mean by it. Hopefully, this article will assist.
Preventative Law in Action
When a client calls me and asks for a Will to be prepared, the chances are high that a Will is exactly what they want. However, after looking into it more, my client might say: “I am going in for an operation next week and I want to make sure my family is looked after in case something happens to me.”
Knowing the reasons behind my client’s request allows me to address more fully the “root” concern that prompts that request. It opens up the possibility of a discussion on the practicalities of other tools that my client may consider and we can then implement those tools together to more completely and effectively resolve the concern. Some of these tools may be legal solutions, such as making a gift, preparing an enduring power of attorney, establishing a trust, or developing a business succession plan. Also, non-legal solutions may require implementation by other professionals such as an accountant or personal organiser.
The practical applications of “Preventative Law” range from regular legal health checks for an individual client to detailed, systematic legal compliance programs being implemented on a business or corporate scale.
What does Preventative Law really mean?
Stated simply, Preventative Law is about acting “proactively” by taking appropriate steps to prevent a problem from occurring. This is opposed to acting “reactively” in dealing with a client’s problem once it has occurred.
To be truly effective, lawyers should try to understand their client’s “real problem”, not just their legal problem so that can proactively work with their client to achieve great results.
The evidence shows that Preventative Law contributes to the life and business success of clients. A client is likely to be saved stress, harm and cost. Preventative Law can also ensure that a client is not misguided about issues that may have a substantial impact on them in the future.
Why wouldn’t a client act proactively or welcome a lawyer’s advice to do so?
Many clients do not:
The preventative lawyer is like a “designer”. The designer role is the dimension of legal practice that is often overlooked because of the “reactive” pressures of legal practice.
The designer works proactively with clients to identify potential legal trouble spots and designs tools to prevent those risks from occurring. In comparison, the “problem solver” deals with problems as they erupt, notwithstanding the best preventative efforts. Failing that, or where justice concerns otherwise seem to warrant it, the “fighter” initiates a court based resolution for the problem. All three dimensions in a lawyer are important. To be only one dimensional would be to put at risk obtaining the best solution for a client.
Where to Start?
Preventative Law starts with an attitude towards the practice of law. Time and effort is made to go beyond a client’s current “problem”. As lawyers we should aim to build strong bonds with our clients. It’s important for a client to feel that they can talk confidentially to their lawyer about anything that may directly or even indirectly relate to their legal affairs. Without this bond, a client will be more reluctant to tell the lawyer everything. Sometimes, a client will innocently fail to pass on information because they don’t see its relevance. In order to overcome this obstacle, communication is essential.
If a rapport of this nature can be established, it is likely that lawyers will be much better equipped to prevent legal problems occurring. By understanding the client’s individual needs, their business, industry and goals, we are better placed to determine what the future issues are, as well as the underlying cause of existing issues.
The Tools of Preventative Law
A lawyer applying the skills of Preventative Law will focus on:
If you have thoughts you would like to share about preventative law, I would love to hear them! It’s a very important discussion to have.
If you are starting or operating a small business by following the tips in this article you will have a solid legal framework for your business success.
In the beginning
I am assuming you’ve already done your homework and worked out there is a need for the product or services you are going to provide and that you have the skills to do the job. If you haven’t then bookmark this article and undertake Due Diligence before you commit. “What the....” you say?
“Due diligence” is a fancy legal term for undertaking a detailed assessment of the risks and benefits of setting up your business. It is particularly important if you are looking at buying an existing business, renting premises, or taking on a franchise, because in those cases you will want to look very closely at what you will be getting and who from.
A thorough analysis of pros and cons is always recommended. See a lawyer, see an accountant, take advice wherever you can get it, but ultimately it is your business so you need to know and understand the risks in it.
Don’t commit to anything until you have seriously examined and understand contracts, leases, local authority and government requirements/restrictions, financial records (if you are buying into a business or franchise), product security, upcoming zoning issues.
There is a heap of public information available to help with your research. If you need to see private commercial information from the seller or franchiser there’s a good chance you will need to sign a confidentiality agreement. READ IT before you do. Feel free to message me for more hints on this.
Well, that issue dealt with, back to my tips on operating a successful small business:
No. 1 Get Your Business Structure Right
Starting at the very beginning, you need to make sure you set up the right type of business structure. You have three main choices: sole trader, partnership or company. Each choice has pros and cons. What will work best for you, may not work best for someone else.
A big con for sole trading is, if you personally own assets then operating a business as a sole trader may involve risk of personal financial loss if the business is not successful.
If you intend to operate a business with one or more other people you really, really (can I say 'really' a couple of more times??) need to document your partnership agreement. The Partnership Act does provide protection for partnerships but its a one size fits all approach and we know how that can look! Besides, documenting your agreement helps you to discuss some of the key issues about going into a business together.
Setting up a company can protect individual assets (so long as you are not signing bank guarantees) and can ensure there is a way to work cooperatively with others. If you do choose to set up a company, then there are many other considerations and I strongly recommend you don’t just grab standard documents. Sure, I get that they are much cheaper, but I can tell you from years of commercial litigation experience that its the standard “simple” and “cheap” documents that get people into trouble - (don’t let me get started on home made documents!! What a nightmare!!)
So, decide on business structure as early as possible (and don't forget to talk to your accountant about tax implications!)
No. 2 Comply with the law
Oh I know this sounds obvious, but during the Due Diligence phase you should have identified key licence and permit obligations for your business and one of the first things you need to do as a business is make sure that you hold the correct licences and permits. As soon as you have done that, record the expiry dates in your calendar if applicable - you do not want to find yourself in a position where you realise your food preparation licence is due for immediate renewal and you are booked out solid for the week and have to squeeze in time to attend to it.
No. 3 Put it in writing
Contracts in writing are an absolute must! Whatever terms and conditions you agree to with your customers and suppliers, you need to make sure that these are in writing. It doesn’t mean you have to spend hours in contract negotiations with a suite of lawyers on each team to work through a basic supply agreement, but there needs to be something in writing, it's as plain as that.
A lot of businesses selling or leasing products and services have standard terms and conditions which are attached to their quote. These terms and conditions don’t have to be the size of a book, but there are some basics that need to be included to protect YOU and to give your customer or supplier certainty. So, if you want a ‘for instance’ read on...
How about, what happens if you offer a product by a certain date but you have to get it in from a third party supplier? Or, what happens if you install materials for a builder in a new property and the builder goes into administration? What if you offer a specific service working cooperatively with other service providers - how is your liability dealt with when the ‘you know what’ hits the fan? Its contracts, terms and conditions which will give you a leg to stand on and you need advisers who have been in the trenches to give you the worst case scenario when preparing those documents. Invest in good paperwork. Believe me you will reap rewards in the long run, or at the very least protect yourself from a lot of pain, as a result.
No. 4 Protect your Intellectual Property (IP)
Whats your IP? It’s that logo you spent weeks designing, the catchphrase, the jingle, the recipe/ formula only you use, the marketing strategy unique to your business, the e-book you wrote. Intellectual property is the intangible thing that comes from your creativity, and you absolutely want to protect that, because it forms the very basis for what makes your business unique. There’s no real shortcut. Trying to do this on your own will cost more than time in the end. You will need specialised IP assistance (spoiler alert: Not me!! But I can refer you to someone I trust).
No. 5 Make sure you get paid by having clear and risk minimising payment collection procedures
Small business is more often than not operating at the whim of big business. Payment terms are stipulated by primary contractors, and you just need to go with the flow. But fortunately some of that is changing. One thing you can do is ensure that where you do have control of payment terms you exercise that control.
Insisting on a significant deposit or payment first is very unlikely to be possible in most cases. Payment on delivery of goods and services is obviously the most effective alternative way to ensure payment is received. You should set up everything you can to try to achieve this. Portable EFTPOS, for example, means you have immediate cash flow even though it costs to obtain it.
But COD can be a luxury. If you have to provide goods and services on payment terms, make sure these terms are stipulated in your terms and conditions and on your quote and restated simply on your invoice.
Follow through with debt management when you say you are going to. Make it personal. Don’t leave it to your office assistant to chase up debts. Learn how to chase up debts without upsetting people. (As an aside however, from my experience, the ones who get upset about you chasing up a debt, are in financial trouble, simply don’t treat your payment as a priority or have some problems with the goods or services you supplied. Either way, you need to know.)
The longer a debt is outstanding the more likely it will not be paid. A firm and swift debt collection process is critical to keeping the cash flowing.
No. 6 Apply Employment Laws correctly
If your small business involves employees make sure you get your ducks in a row with employment law. Make sure your employees or contractors have contracts. Have a manual which outlines human resource policies (clear guidelines take time at the beginning but save thousands of dollars along the way). Give your employees what they are entitled to, when they are entitled to it. Make sure that you have poor staff performance issues dealt with promptly and lawfully following the manual you prepare.
Every business adviser will tell you that, if you have employees, they are the backbone of the business so take care of your back!! The costs of recruitment and/or dealing with employee matters including down time are major.
AND ONE GOLDEN RULE
One of the common threads in all of the tips I have given is an overarching rule. Avoid disputes and litigation as reasonably as you can. Sometimes, disputes are unavoidable. Downtime, costs of lawyers and compromised claims cause serious bleeds in your business. By taking preventative steps you can minimise your exposure to these and those preventative steps include the tips above.
I am interested in a dialogue about the subject of business law tips. I look forward to hearing your views.
My legal waiver statement: Seriously, if you are relying on the above tips or anything you find on the internet as legal advice you have big problems already. News and Views is definitely about sharing information and ideas. The only legal advice you can rely on is advice given to you personally after your individual circumstances have been taken into account.
One of the questions I am asked in my travels, is "What is the best way to plan the gifting of our family bach?" and today it was on my mind as I made my way to the beach to visit the grandkids.
There's a whole range of issues to think about before answering that question.
The main issue is that, although the government treats a bach as an investment property, often it's either been in the family for generations or it is your intention that it becomes a gift to future generations. So it doesn't really hold investment value - it's more about heritage.
The sorts of considerations you might face in working out how to preserve the bach include:
The point is that every family's circumstances are unique to that family and a one-size-fits-all approach, isn't going to necessarily be the right solution for your family.
One example that springs to mind is a recent case of mine where the family was struggling to work out what to do. In that case, my client had promised Mum and Dad that he would keep the bach he had inherited for use by future generations of the whole family (including his brothers and sisters) but my client owned the majority of the property, so property ownership didn't quite reflect this promise. My client's accountant had advised him that he should set up a family trust to own and manage the family bach. While it is one approach which can work, it was not quite the right fit for my client.
My client owned the majority of the property and wanted to continue to do so. All he wanted to do was make sure that his parents'wishes that future generations of his and his siblings' families could enjoy the use of the property were documented appropriately, while retaining majority ownership by him or his children. Working together with his accountant, and the other owners, I was able to achieve a more suitable and more cost effective solution to the problem.
Ultimately in these sorts of situations, you do have to realise that your commitment to the future use of the bach may differ to the intentions of future generations and there really is only so much you can do. Ruling from the grave, so to speak, has its limitations.
But if your family sees the care and attention you put into the planning for the bach and your family's future, that often translates to a greater understanding of its significance. The same applies to all of the assets you have strived so hard to obtain.
I'd love to hear your comments on the subject of preserving the bach for future generations.
On that note, its time to get back to the beach with the grandkids for epic sandcastle building while the sun is out to play!
Trish likes to do her thinking while she drives - what a perfect combination for a mobile lawyer!
This blog shares those thoughts.
Subscribe for more information and feel free to share your views.