Business law and using a solicitor

1.1 At the heart of business law are the laws covering two key areas:

• Contracts - between yourself and your suppliers and customers.
• Trade - how you are allowed to sell, and what restrictions apply.

1.2 Other major areas of business law are covered in:

• Forming a business.
• VAT.
• Searching for premises.
• Employment law.

1.3 A solicitor can advise you on which other laws may apply to your situation (see 7).

2.1 A contract exists when three conditions are met:

• Both buyer and seller are capable of making and intending to make a contract.
• An offer is made and accepted.
• Something of value is exchanged.

2.2 A contract can exist whether there is anything in writing or not.

For example, every time a customer buys something in a shop, there is a contract.

• Some particular kinds of contract (eg property leases over three years) must be in writing.

2.3 Only terms which have been agreed before or at the time of making the contract apply.

• But there are also implied terms (see 3).

2.4 The terms of the contract govern what the seller and buyer are obliged to do.

• Legal action can be taken if one party fails to perform his or her part of the contract.

3.1 The seller must be entitled to sell.

• If you buy something from someone who does not own it, you have the right to get your money back from the seller.

3.2 The goods must match their description.

• Descriptions on labels, or claims made by the seller, must be accurate.

3.3 Goods sold in the course of business must be of satisfactory quality.

3.4 Goods must be fit for the purpose.

• So if a customer asks for a component to use in a piece of equipment, your component must be suitable.

3.5 If a batch of goods is sold after providing a sample, the goods must match it.

4.1 A business can produce a 'terms of trading' document setting out standard conditions for its contracts.

Common clauses include:

• Details of price, payment date, payment method and delivery.
• A guarantee for a limited time period (in addition to the buyer's statutory rights).
• A clause giving the seller the right to retain legal ownership of the goods until they have been fully paid for.
• A clause giving the seller the right to delay delivery, when this is due to circumstances beyond his control.
• Clauses limiting the seller's liability (but see 4.2).
• A clause stating that nobody apart from the buyer and seller is to have any rights under the contract.

4.2 You cannot alter a consumer's statutory rights.

• Signs which try to exclude private consumers' statutory rights are invalid.

5.1 Use a solicitor to draw up standard terms of trade. When selling to consumers, terms must always be 'fair' and in plain English.

Make sure the buyer is aware of, and agrees to, the terms before the deal is made.

• If the contract is in writing, it should expressly refer to your terms of trade.
• In most cases, any reference to your terms in an invoice will not be effective.

5.2 Reduce the risk of breaching the implied terms by describing your product or service accurately.

• State tolerances in technical specifications, to give yourself practical margins for error.
• Explain to the buyer what to expect of goods of that age, or price.
• Let the buyer know of any limitations and defects. Do not let enthusiasm lead you into making exaggerated claims.
• Allow the buyer to examine the product.
• Make sure any safety instructions are clear and accurate.
• Make sure that any samples you provide are representative.

5.3 If someone buys against your advice, ask the buyer to sign a written confirmation.

5.4 If the buyer asks if the product is suitable for a specific need, say you do not know - unless you are very sure of your facts.

• From a legal point of view, it is unwise to ask buyers what they are going to use your product for, as you may be liable if it is not suitable.
• If a buyer orders customised goods, you may be liable if they do not fit their purpose.

6.1 Use a solicitor to draw up standard terms of trade for purchases, which you can enclose with your order.

• If possible, make sure it is agreed that your terms will apply, not the seller's terms.

6.2 Protect your rights under the implied terms.

• Ask for detailed product specifications.
• Ask lots of questions - as if you do not know much about the product.
• Insist, at the time of ordering, that the product must match the specification.
• State what quality levels and standards you expect.
• Tell the seller what you will use the product for.
• Keep a record of claims made by the seller.

6.3 Examine the product thoroughly - or not at all, if you want to examine it later.

Otherwise, you may lose your right to reject it if you then find a defect.

• Keep samples you examine for reference.
• Do not sign delivery notes saying the goods were satisfactory until you have thoroughly inspected them.

6.4 Ask the seller to inform you of any hidden dangers, limitations or quality changes.

6.5 If prompt delivery is important, tell the seller and confirm it in writing.

7.1 The seller is likely to be liable for death, injury or loss to property caused by defective products or services.

• This includes design, manufacture and marketing defects.
• Everyone involved in the supply chain (eg retailer, manufacturer etc) can be liable.
• Third party liability insurance is essential.

7.2 Products must meet safety regulations.

• Ask your local Trading Standards Officer for advice (call the local council).

7.3 False descriptions are illegal.

• A customer can take action against you if he or she buys as a result of a false description (see 3.2).

7.4 Misleading prices are illegal. You must not:

• Display goods at a low price, and then charge more.
• Claim to offer a sale price or a discount, when the price has not been genuinely reduced.

7.5 Certain types of business, including businesses which offer credit (other than trade credit), may require a licence.

7.6 Some businesses are subject to extra regulation (eg those selling food or by mail order).

• For example, the Consumer Protection (Distance Selling) Regulations 2000 place restrictions on telephone and Internet-based sales.

7.7 Keeping information about individuals on a computer means you probably need to notify the Information Commissioner (01625 545745).

• The Data Protection Act applies to all personal records (including those not on computer) and in particular to any on the Internet. Registration costs £35 for a year.
• You may need to notify the commissioner even if you record only basic information (eg names and addresses), though there are some strictly-defined exemptions.

8.1 Start by getting a basic understanding of which laws are likely to affect you.

• You can talk to a solicitor under the Law Society's 'Lawyers For Your Business' scheme (020 7405 9075).
• The most precise information may come from your trade association, or the trade association for a related industry.

8.2 You may need help with a particular task.

For example, to:

• Set up your new company or partnership, or to advise you on taking up a franchise.
• Buy, sell or rent premises.
• Collect debts (see Credit control).
• Draw up a standard employment contract for your employees.
• Draw up standard terms of trade, or a specific contract for a major piece of work.
• Advise you on protecting your rights to new ideas and designs.
• Act for you in a legal dispute, and if you have to go to court.

9.1 Start with the basic information sources.

• Friends and other business contacts, who can recommend (or not) the solicitors they have used.
• Professionals, such as bank managers and accountants.
• Business Link, or your local Chamber of Commerce or Enterprise Agency.
• Directories and advertisements.

9.2 Personal recommendations are usually the best source. Always ask:

• What was the solicitor engaged to do?
• Is the solicitor a specialist?
• Was the solicitor approachable, effective and easy to get on with?
• How much did it cost?

9.3 Most small businesses find it preferable to use a small firm of solicitors.

• Your business will be a valued client.
• Costs are usually lower.
• It may be easier to build up a good relationship with the individuals.

9.4 Even good small business solicitors will not be able to do everything, and will recognise their limitations.

• Ask how much experience your solicitor has of your particular problem.