Dutch law does not require entrepreneurs to draw up general terms and conditions. Yet it is highly advisable to do so, especially in the early stages of your business. Many starting entrepreneurs think that general terms and conditions are superfluous and only useful for large companies. In this blog, I explain why every business entity should have a set of general terms and conditions ready before their first customer.
Clarity
Using general terms and conditions, it is at once clear for you and your customer what your mutual rights and obligations are. There is no ambiguity about all kinds of important peripheral issues such as delivery, payment, liability, guarantee, etc. The use of general terms and conditions prevents discussion on important matters after the deal has been closed. In case no general terms and conditions were agreed on by your and your client, the law determines fills in the gaps and defines the rules. Tricky, because the law does not cover all topics extensively. Then, case law (jurisprudence) has to be reviewed to see what a judge would rule on a particular point of discussion. Of course, you want to avoid all this by making good agreements with your client. Drafting general terms and conditions is the easiest way to do so.
Limiting risks
Doing business involves risks. As an entrepreneur, of course, you want to limit these risks as much as possible. Excluding all responsibility is not allowed, but devoting a few provisions to limiting certain risks is convenient. For example, you cannot exclude liability if you fail to deliver, but you can often stipulate that liability is limited to a certain amount. Note: there is a big difference when you are dealing with other companies (B2B) or consumers (B2C). When dealing with consumers, you have less freedom when drafting general terms and conditions. Read my blog on the differences between drafting conditions on B2B and B2C here.
Unifying business processes
General terms and conditions are standard clauses under which a company indicates it wants to do business with another party. They are clauses that apply as preconditions around agreements and they are meant to be used several times in different contracts with buyers and suppliers. It saves your company time and costs not to keep redrafting all these terms in separate agreements. After all, in offers or purchase agreements with customers, you only want to include core clauses: the quantity, price and other specific features of the product or service to be delivered. Peripheral issues such as delivery, payment and warranty are regulated in the general terms and conditions. Also, your business processes are unified when you use general terms and conditions. For every department within your company, it becomes clear where they stand. Take the finance department, for example, which knows it must take action when the 14-day payment term on an invoice has expired.
I hope this blog has made it clear that general terms and conditions are indispensable for every (only) entrepreneur. General terms and conditions are your set of ground rules for customers and suppliers that make sure everyone knows where they stand with no room for differences in interpretation or discussion. In addition, you cover yourself by excluding certain risks and standardize your business processes, which makes doing business easier. Need help drafting your general terms and conditions? Feel free to contact me.
