Are you prepared to face growth in the service sector?

In August 2013, according to the latest survey by Markit and the Chartered Institute of Purchasing and Supply (CIPS), the UK service sector achieved its greatest amount of growth in 6 years (BBC News 4 September 2013).

In light of this good news it is worth considering the fundamental issues all service providers should be considering in their terms and conditions of business with consumers.

Your terms and conditions of business are amongst the most effective weapons in your arsenal against business failure and help to ensure survival.

Reviewing your terms and conditions of business against these fundamentals will help mitigate the risks facing your business during this period of growth.

Payment Terms – It is important to clearly state how long your customers have to make payment. Getting this wrong can greatly affect your cash flow and can drive the business to seek expensive solutions provided by lenders including bridging loans and overdraft facilities. Typically payment terms between 14 – 30 days from the date of an invoice are reasonable. Alternatively, consider requiring advance payment for services, or a form of deposit prior to carrying out any services. A supplier should also ensure that they are entitled to claim interest for late payment (3-4% per annum) above the base rate of the Bank of England.

Limitation of liability – Whilst service providers providing services to consumer cannot limit their liability to the same degree as business to business relationships it remains important to limit liability. At the very least, service providers should ensure that their liability is limited to those circumstances which are ‘foreseeable’ and therefore a direct consequence of a failure to provide the services. What is foreseeable will be a matter for the individual circumstances. For example, it may be foreseeable for a decorator to meet the costs of repainting a ceiling or wall if the job was not finished properly, but not for the difference in expected sales figures of a private individual selling their home as a result of poor paintwork. Alternatively, a council would pay out the costs of repairs to an individual in the event that it failed to carry out its obligation of repair on a council flat, but would not pay out for the loss of that same individual of his or her ability to purchase the flat.

Emma Ryan v London Borough of Islington [2009] EWCA Civ 578.

Standard of Care – It is also fundamental to ensure that your terms and conditions do not imply or expressly state a higher standard of care beyond the typical “reasonable” standard of skill and care as this potentially raises the bar for the performance of the services above what is expected, and implied by the operation of legislation e.g. The Supply of Goods and Services Act 1982. In many respects this advice extends to the leaflets, brochures, website and other promotional material of the business. In particular, it is very important to avoid the use of ‘guarantee’ wording unless the implications have been thoroughly considered and understood.

If you are concerned by your businesses exposure to the risks created by a growth in the service sector and in particular by inappropriate, out of date or poorly considered terms and conditions then do not hesitate to contact the corporate and commercial team at Else Solicitors. The team offer a free no obligation review of your business terms and conditions.

Contact Greg Bullock today to arrange your review on 01283 526220 or email greg.bullock@elselaw.co.uk.

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