Putting a Formal Sales Process in Place
It has never been more important for your business to put a formal sales process in place.
Why do I need a formal sales process?
When you sell a product to your customer, you are entering into a contract. If there is no written document, you risk leaving it to the court to have to work out the terms of your contract in event of a dispute. To do this, they will take into account many factors - such as the terms of any previous transactions and the norm for your industry. Of course, asking the court to decide anything is expensive and time consuming - far better to have terms which you want and understand governing the contract in the first place.
Another risk is that you could inadvertently enter into a contract with your buyer on their terms, which will of course have been drafted to favour the buyer - leaving you with little recourse if they don't pay - or much worse.
Do I have to produce a written contract?
In an ideal world, you would have a written contract setting out your terms, which is signed by your customer before trading begins. In the event of a later dispute (for example, when you have to chase a debt) this would provide a court with sufficient evidence that your customer has breached the terms of your agreement, keeping litigation costs down and speeding up the process. However, it is rarely practical to send out a written contract every time your customer places an order.
This had led many businesses to use standard 'Terms of Business' instead. These are often printed on sales documents, such as on the reverse of a purchase order or order form and often on the back of invoices.
The 'Battle of the Forms'
Problems can arise when both buyers and sellers use standard Terms of Business and both think their terms should govern the relationship. This problem is often called the 'Battle of the Forms'.
Usually A offers to buy goods from B on its (A's) standard terms and B purports to accept the offer on the basis of its own standard terms. In this situation, the battle is often won by the party who fired the "last shot", that is, the last party to put forward terms and conditions that were not explicitly rejected by the recipient
So what should I do?
First, think about how you do business. Do customers place orders on the telephone? By e-mail? On an order form? Do they issue a purchase order? Do you send confirmation of the order?
Next, think about how you can incorporate your terms in a way that will not hinder your business. Could you insist on orders being placed via an order form? Could your website include a tick-box system whereby your customer has to accept your terms when placing the order?
When orders are placed, do you issue an order confirmation? This is your ideal opportunity to fire the 'last shot'. Make sure that your confirmation re-states your terms and makes clear that your acceptance of the order is on these terms.
Lastly, make sure that your terms are in an accessible and obvious place. Previous cases have rendered terms invalid because they were not sufficiently brought to the notice of the other party. So, if you print them on the reverse of your stationary, make sure your customer can read them. Highlight any particularly onerous terms, such as payment terms or the exclusion of liability. If possible, refer to the terms in or next to the signature box, or even better, structure your website or forms so that your customer must indicate that they have read and acknowledge your terms.
By developing a structured sales process and sound Terms of Business you can rest assured that you have a safety net in place if things go wrong - which means you can get on with running your business.
The Metcalfes Business Matters Team are on hand to help - whether you would like to run your existing sales process past an expert, or to produce a bespoke set of T&C's to suit your business.
For more information, please contact Partner Tony Forster on 01179 453040 or at tforster@metcalfes.co.uk
Contact
Tony Forster Head of Business Matters
Martino Burgess Associate
Bonnie Thomas Graduate Member of the Institute of Legal Executives
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This article summarises areas of law on issues we believe may be of use to you. It is provided for information only. It is not a comprehensive review of the subject. It does not constitute legal advice. Accordingly, it is published without responsibility for any loss arising from any action taken or not taken as a result of it.