Frequently asked questions

Terms and conditions for supply of services to business customers


What is it? Terms and conditions set out the rules and specifications which apply in every supply of services that a seller makes and helps to make everyone aware of their rights and obligations from the outset. Why is it important? Make sure you protect your business interests with professionally prepared terms and conditions. When supplying services to a business your terms and conditions should cover issues such as timing and termination of supply, orders, specifications, obligations, pricing, payment, intellectual property, confidentiality, warranties, liability and termination.




Terms and conditions for sale of goods to business customers


What is it? Terms and conditions set out the rules and specifications which apply in every sale of goods that a seller makes and helps to make everyone aware of their rights and obligations from the outset. Why is it important? When selling goods to a business your terms and conditions should cover the nature of products to be sold, orders, delivery, pricing, payment, risk, warranties, defects, liability and confidentiality.




Heads of terms (HOTs)


What is it? This is similar to a Memorandum of Understanding (MOU)s, Term sheet or Letter of intent. The heads of terms set out the key terms agreed by the parties before entering a business transaction. It is not contractually binding. Heads of Terms are usually set out in a letter or document setting out the key terms agreed by parties who intend to enter a binding contract. It is also known as Letter of Intent, a Memorandum of Understanding (MOU) or a Term Sheet. It is a useful tool when two or more parties intend to enter a future contract and want to identify, describe and agree, without it being contractually binding, the terms to be further negotiated and then recorded in a contractually binding contract. There will occasionally be statements in heads of terms which are exceptions to the general approach that heads of terms are not binding: this will occur if the parties put in statements which heads of terms expressly state are to be of legally binding effect until a definitive contract is signed. If that is the case those statements will generally be binding. Why is it important? Heads of terms are useful to set out the progress made during negotiations, reduce the potential for misunderstandings, indicate the major issues which still need to be resolved and make it clear what the parties intend when they enter into the contract. The disadvantage of Heads of terms is that it can take up a considerable amount of time and may distract the parties from working on negotiating a full and detailed binding contract. Risks There have been occasions when the parties to a proposed commercial arrangement never actually agree or sign a definite contract and have gone on to implement their deal based only on the Heads of terms. This creates a very uncertain legal position which may lead to disputes and legal problems.




Letter of intent (LOI)


What is it? A Letter of Intent is a pre-contract, non-binding document setting out the key terms agreed by parties who intend to enter into a binding contract. It is also known as Heads of Terms, a Memorandum of Understanding (MOU) or a Term Sheet. It is a useful tool when two or more parties intend to enter into a future contract and want to identify, describe and agree, without it being contractually binding, the terms to be further negotiated and then recorded in a contractually binding contract. There will occasionally be statements in a letter of intent which are exceptions to the general approach that a letter of intent is not binding: this will occur if the parties put in statements which the letter of intent expressly states are to be of legally binding effect until a definitive contract is signed. If that is the case those statements will generally be binding. Why is it important? A letter of intent is useful to set out the progress made during negotiations, reduce the potential for misunderstandings, indicate the major issues which still need to be resolved and make it clear what the parties intend when they enter into the contract. The disadvantage of a letter of intent is that it can take up a considerable amount of time and may distract the parties from working on negotiating a full and detailed binding contract. Risks There have been occasions when the parties to a proposed commercial arrangement never actually agree or sign a definite contract and have gone on to implement their deal based only on the letter of intent. This creates a very uncertain legal position which may result in disputes and legal problems.




Invoices


What is it? An invoice is a statement setting out the goods and or services that have been supplied by a seller to a buyer and the money owed for those goods and or services. It is created by a seller or supplier to request payment for goods sold and or services provided. It is also called a bill. Why is it important? It identifies the trading partners, specifies the terms of the deal and provides information on the payment figure, the available methods of payment and the payment terms i.e. the maximum amount of time that a buyer had to pay for the goods and or services that they have purchased from the seller.




Sales of goods agreements





Purchase order


What is it? A purchase order is prepared by a buyer when the buyer orders goods or services from a seller. The purchase order will indicate the type of goods, quantity of goods and the price the buyer is willing to pay for the products and or services.

Once the seller accepts the purchase order it becomes a legally binding contract as the seller has agreed to sell the goods and or services at the prices put forward by the buyer. The seller will then issue an invoice to the buyer based on the purchase order.

Why is it important?

Purchase orders are important for businesses as it is instrumental in tracking expenditure, makes orders easier to track, helps avoid audit problems and provides contractual legal protection for the buyer and the supplier.

Alongside a purchase order system, it is vital that a company has strong credit management practices to safeguard cash flow from bad debts and late payment.

A strong debt collection process is vital to ensure payment is made when the goods or services have been delivered.

Invoice promptly and accurately and chase up with reminders. If a customer will not pay or ignores payment requests take action – Appoint a debt collection agency, take debt recovery action through the courts or pass the debt to a solicitor.

Pure Business Law has experienced debt collection lawyers who can assist you with debt recovery.




Services agreement


What is it?

A Service agreement also known as a Service contract or Contract for Services is a written agreement between a service provider and a customer setting out agreed terms for the supply of services. The terms should include details of the services to be provided, location of provision of the services, payment. Limitation of liability clause, tools or materials to be used, termination of the agreement, ownership of intellectual property clause and dispute resolution clauses.

Why is it important?

A services agreement is required when a business wants to engage another business to supply services. If your business is the service provider, you should use a service contract whenever you are hired by a customer to complete a service. If you are the customer and the service provider does not supply the contract, you can use a Service agreement to ensure that the terms of the service relationship are clear.

Having a services agreement will ensure that the parties to the contract understand their obligations and will protect the positions of both businesses in the event of termination of the contract or legal proceedings.





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