5 Reasons Why A Terms & Conditions Is Important

Nov 20, 2018
Reading Time: 3 minutes
Written by Justin Pasqualino

Most of us are familiar with terms and conditions as that thing which we don’t read. However, for a business, terms and conditions are a vital part of their daily functioning. If a business lacks terms and conditions they leave themselves vulnerable legally. Read on to find out more.

1 Payment

In the terms and conditions, you can set out penalties for failure to pay on time. There are other conditions which you can set like entitlement to a discount if a consumer reaches a certain threshold. The terms also structure how payment is to be made and what happens if the payment needs to be refunded. The terms also set an expectation between you and the client.

2 Intellectual Property

As a business, you will usually have some intellectual property. This may come in the form of recipes, blueprints or things that are copyrighted or registered. By laying out in your terms and conditions what is copyrighted you can then begin to protect your intellectual property as you will have a contract between you and other users.

3 Limit Liability

Terms and conditions state the obligations of the consumer/supplier and your obligations. By setting out both parties rights and responsibilities a clear record exists. Inside this record is usually a clause which limits the liability of the business. This means in certain situations the business will not be liable for certain acts. The other party by agreeing to the terms and conditions, therefore, gives up their right generally to sue you over certain things which you have limited your liability in.

There is a local rock climbing business. There are signs warning of the danger of rock climbing. Everyone who wishes to take part in rock climbing must sign a waiver and agree to the terms and conditions of the rock climbing area. The terms and conditions say that members will not climb without someone belaying the rope for them. A new member is climbing and their friend who is a belayer walks away. You can start to see how in this situation it just provides that extra step of security to lay out in your business that you aren’t liable for negligent acts in this case.

4 The Terms and conditions are breached

The ultimate reason for terms and conditions is for when consumers or suppliers don’t follow them. In the case that the terms and conditions are breached, you have the legal right to take action. Whether the terms were online as part of a website, displayed in a car park or in a shop they all function the same. You as a business now have a record of what others have agreed to and can, therefore, show how the contract has been breached. An initial step when the terms have been breached is to send a cease and desist letter.

5 Returns and refunds

Being prepared for if something goes wrong is always a must. Consequently, as a business, you must comply with Australian Consumer Law. This means outlining your refund policy. For example, if there is a major failure with a product consumers have the right to a refund. You may decide to go beyond that and allow consumers to return products within 30 days even if there is no fault with the product. To do this it all needs to be stated in your terms and conditions.


Ultimately, every business should have terms and conditions. Therefore, As a business, you want to protect your rights to legal action. Regardless, terms and conditions add that extra level of trust and authenticity to your business.

Have more questions? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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