Health-Check Your Business: Part 2

In this second part of our two-part ‘health-check’ series, our friends at Corvus take you through some important considerations to keep you in good shape from a Business Law perspective. 

If you haven’t had a chance to read their first article about compliance with HR and Employment Law, you can check it out here.

Compliance with Business Law: 
As a handy reference tool, Corvus has developed a checklist to see how you’re tracking when it comes to your legal documents and obligations.  You can find it here.

1. Business Terms and Conditions
Your business T&C’s are an essential, but often overlooked, document; a necessary evil for some, where handshakes and relationships seem to be inconsistent with formal legal documentation. However, T&C’s inform customers about the product or service you’re selling and explain how you’ll provide it to them. They also outline both parties’ rights and responsibilities, and give your customers certainty about what your obligations are. A good set of T&C’s should minimise the risk of expensive disputes with your customers and act as a protective shield for your business when problems arise.

Crucially, your T&C’s must be fit for purpose. Do they still reflect your business operations and objectives, business type or your expanded business (e.g. you may now be selling online as well as in-store)? Are they spell-checked and legally correct?

Your T&C’s should include coverage for the following:

  • How you service and deliver,
  • Your payment terms,
  • How you may apply interest on late payments
  • What you do about refunds and returns
  • How you deal with privacy and data protection
  • Which warranties apply and how they may be limited
  • Who wears what risk
  • How intellectual property is protected; and
  • How disputes can best be resolved.

You can also think about your business T&C’s as a marketing tool, and not just as that ‘necessary evil’ written by lawyers for lawyers. Your T&C’s can be made easy to read and reflect your brand. In this way, they can be a useful tool of engagement, which helps to ensure they get signed – companies like Xero and Google are great examples of this. Similarly, balanced terms that reflect your customers’ rights can enhance your reputation for being easy to deal with, as well as making it quicker to get sales completed.

And on that point, if you use T&C’s, make sure you get them signed, and signed before you supply goods or services!

2. Consumer Guarantees
Under Australian Consumer Law you are obligated to guarantee the products and services you sell, hire or lease that are valued under $40,000 OR are typically purchased for personal, household or domestic use. We have underlined OR because it is critical to understand that in most cases, goods or service you sell for less than $40,000 may be subject to these consumer protections even if your customer is not what you believe to be a ‘consumer’. They don’t have to also be for personal, household or domestic use.

Consumer rights do not apply to items worth more than $40,000 that are purely for business use. Nor will they apply if your customer intends to on-sell the item so they can re-supply as a business, or the item was bought as a one-off from a private seller or at auction.

There are also ways to limit some of your liability if you are supplying goods or services worth less than $40,000 to another business that aren’t otherwise already excluded from the guarantees. These limitations should be included in your T&Cs. Have a think about whether your goods or service may fall into the definitions. If they do, then take note of the following:

  • Products must be of acceptable quality. That is, they must be safe, enduring, and look acceptable and perform as expected.
  • Services must be provided with due care, skill and technical knowledge. They must be of sufficient quality and meet consumer expectations. In addition, they must be delivered within a reasonable time.

Failure to meet these guarantees comes at a price. If you fail to deliver on these mandatory guarantees your customers have a right to either: a repair, replacement or refund; cancellation of the service; and potentially also compensation for loss or damages.

3. Authority Regarding Processes and Procedures
If in your business you are often signing legal documents (and this could be anything from photocopier leases to cloud services to large customer contracts) you should think about who is signing on your business’ behalf, and whether you need some rigour and process around signing up to legal commitments. It goes without saying that signing something you don’t understand or having a whole pile of commitments agreed to that you didn’t know about, can be a recipe for disaster. This is especially so if your business is signing up to another’s standard documents. These are usually very one-sided and don’t reflect your unique business circumstances.

As a simple risk management exercise, you may want to think about some rules and processes around what is being signed up to, who can negotiate and agree to it for your business, as well as some escalation points for material commitments and issues.

4. Insurance Obligations
It’s also important to double check with your insurance broker that you can make the commitments you’re agreeing to. Insurance shouldn’t be just a yearly conversation. The last thing you want is a surprise from your insurer because you forget to tell them something critical. Therefore, a process for checking off legal commitments with your broker or insurer before you sign up is another simple yet effective risk management tool.

These are just the starting points for legal compliance and protection. Feel free to use Corvus’ Business – Protection and Promotion Checklist to tick off the items discussed here, and to consider the next steps in marketing your company. You can also reach Maddy at Corvus via email at if you’d like further clarification or assistance with Business Law compliance.