A businesswoman thought an app that allowed her customers to browse items, make purchases, and send feedback would revitalise her business. Having no programming skills, she took her idea to a software company. The company gave her a quote and their terms and conditions, both of which she accepted.

Unfortunately, the business owner could not afford the final invoice. The software company withheld the app and sold it to one of her competitors.

There was little the owner could do, because she’d agreed the company could keep the app if invoices were unpaid, and that the company retained ownership of the app and associated intellectual property.

Often people don’t bother reading the terms and conditions until it’s too late. If the director had read the terms and conditions earlier, she could have asked the software company to change them.
With smaller one-off contracts, companies are often willing to vary their terms to get your business. If they weren’t willing to budge, she could have gone to another software company.

Key terms to look out for include:

  • Contracting out: Does the contract say that the Sale of Goods Act or Consumer Guarantees Act will not apply? Some laws can be contracted out of, others cannot be. It’s important to make sure you’re not giving up important rights.
  • Debt recovery: Will you be liable for collection costs? Does the contract let the creditor keep property if invoices are not paid?
  • Dispute Resolution: Do you have to do certain things if you disagree over the contract? What happens if you dispute an invoice?
  • Intellectual property: Who owns the intellectual property? Are there any limits on how you can use intellectual property?
  • Limited liability: Do you agree not to hold the seller liable for certain things? You might want to delete some of those clauses.
  • Payment: How do you pay? Are there penalties for late payment?
  • Price: How much does it cost? Are there hidden extras?

It’s easy to overlook terms and conditions when entering a contract, especially when they are written in fine print on a back page or buried in a website. People often accept without thinking.

One online international retailer revealed, as a joke, that it owned the souls of thousands of customers due to a clause in its online terms and conditions.  The majority of its customers clicked a checkbox agreeing to the terms and conditions, without even reading what they had signed up to. Luckily for the customers the company gave back all their souls for free! It clearly pays to read before you sign or click.

Sometimes there is no choice but to accept standard terms. In a contract with an electricity provider, for example, there’s often no room for the household consumer to negotiate, and alternative providers may have similar terms. It still pays to read and understand what you are agreeing to.

A business person entering into important one-off contracts usually has some room to negotiate, and should read the offered terms and conditions to ensure they are getting what they want from the agreement and acting in the best interests of their business.