What are standard conditions? Which terms and conditions are we talking about?
In law, standard terms and conditions refer to a set of rules that are pre-formulated for a wide range of applications. They standardise the drafting of contracts beyond individual cases and usually contain industry- or situation-specific provisions that the applicable law could not provide for in the specific case.
Standard terms and conditions can be designed for one's own organisation, for members of a limited group, or for the general public. This article deals only with quasi ‘public’ standard terms and conditions created by neutral organisations.
Which standard conditions exist?
There are too many standard terms and conditions to list them all. Here are a few examples grouped together (listing them all would be an impossible task):
- Standard conditions mandated by laws
- Internationally standardized terms
- Incoterms® covering commercial terms of produce delivery
- Industry association terms
- Green terms and conditions of the German electrical industry
- Several sets of clauses by Bitkom (e.g. commissioned data processing agreement, B2B terms for digital industry companies)
- Privately set general conditions that may become standard with sufficient use
Of course, a company's general terms and conditions are also standard terms and conditions.
It is always important to understand the area for which a set of terms and conditions has been written, as they are only well suited to that area.
What makes standard conditions good?
Good standard terms and conditions regulate all essential parts of the situation they're applicable to. They come with specific guidance on how to deal with areas that are not regulated. They also include explanations of the area of application and instructions for use. In terms of content, they should incorporate the interests of both contracting parties appropriately. A trustworthy, sufficiently reputable organisation to enable both contracting parties to have confidence in the terms and conditions should act as owning body.
Which benefits do standard terms provide?
- No creation effort.
The regulations already exist, so there is no need (or at least less need) to draft and fine-tune new rules. - Appropriate provisions.
Standard terms and conditions are in many cases more balanced than individual contracts. Of course, it is important who issues them; an industry association may prioritise the interests of its industry partners over those of entities that are not members of the association, such as customers. Yet, such standard conditions are in most cases nevertheless more balanced than those of an individual contractual partner. - Easier to negotiate.
Because they are generally more neutral and, above all, effective, they are usually easier for the contracting parties to accept unchanged than the contracting party's own terms and conditions. This often saves several rounds of negotiations. - Greater generalisation.
Standard terms and conditions are usually written for a wider range of cases than specific contracts, so they are more broadly applicable. - A single review is often sufficient.
Often, an organisation only needs to review the standard terms and conditions for a specific area of application once and then make them available for use in that area with a general approval. - Coverage of modern business transactions.
Standard terms and conditions can effectively cover business transactions that are not sufficiently anticipated by the law, for example in IT, such as ‘as a service’ business models, as a set of terms and conditions can be written for a specifically defined area of application.
Which disadvantages come with using standard conditions?
- Not specific.
Once standardised, the terms and conditions cannot cover the specifics of individual cases and are therefore less tailored to your particular situation. - No process specifics.
By their very nature, standard terms and conditions cannot cover the specifics of your business. Where your business requires special procedures and cooperation, this should be regulated in concrete terms, which standard terms and conditions do not usually allow. - Difficult to adapt.
Adapting the terms and conditions means losing many of their advantages, so adaptation is often not very attractive. - Only partially available.
Standard terms and conditions are only available for certain use cases; in other cases, suitable partners with sufficient numbers, roles and trustworthiness would first have to be found to create such terms and conditions. - Big creation effort.
The initial creation of standard terms and conditions is comparatively complex and requires much more consideration and refinement than an individual contract. However, this is only a disadvantage if you do not have access to existing standard terms and conditions.
What key questions can help in deciding between standard terms and conditions and a specifically developed contract?
- What is your approach to contract negotiations? Do you want to achieve the most advantageous terms legally possible, or do you prefer to negotiate in a spirit of partnership with the aim of reaching a fair and quick agreement?
- What is your negotiating power? Can you simply enforce your decision?
- To what extent are there special features of your business that require a specific approach to be laid down in the contract?
- Are there industry-specific terms and conditions from a reputable publisher that are tailored to the respective business situation?
How to decide on whether standard terms are beneficial?
Unfortunately, there is no general recommendation. It depends very much on your business needs. If you would like assistance in making your decision, please do not hesitate to contact us. We can analyse the risks and opportunities from a legal perspective and also serve as a discussion partner for your own considerations. Contact us for a free of charge initial discussion.