What is General Terms and Conditions?

General terms and conditions are the small print of commercial life. Every supplier has them, almost no one reads them, yet they contain provisions that may be decisive in a dispute.

Legally, general terms and conditions are valid when they have been made applicable to the agreement and the other party has had a reasonable opportunity to review them. In practice this means: the GTC must have been enclosed, available via download or web link, or the other party must have been referred to them expressly before or at the time of concluding the agreement.

In B2B relationships, the rules on voiding unreasonable clauses are less protective than in consumer law. However, commercial parties may still challenge unreasonably onerous provisions, particularly where there is a significant imbalance in negotiating power.

A common practical problem is the battle of forms: both parties use their own GTC and reference them in their quotes and orders. The legal default in most jurisdictions is that the GTC of the party who refers to them first apply, unless the other party expressly rejects this.

The content of GTC varies significantly by sector and supplier. Pay particular attention to liability limitations, payment terms, termination provisions, indexation clauses, and intellectual property terms.

Almost every commercial contract references general terms and conditions, but most are never read. Yet it is precisely the GTC that contain the most risk-laden provisions: liability capped at three months' invoice value, unilateral price changes permitted on short notice, or a choice of jurisdiction in a distant city.

For SMEs it is prudent to review the GTC of new suppliers for contracts above a certain threshold, at minimum scanning the liability limitation and termination provisions.