An Old Chestnut Revisited – Incorporation of Standard Trading Conditions

By Pauline Kumlehn, Partner in Shipping & Logistics

In the current economic climate it is not surprising that businesses emphasise the importance of their commercial relationships and the need to gain or retain business as a core focus.  Consequently, the old chestnut of proper incorporation of standard trading conditions (STCs) is not given the proper attention it deserves.

The reality, however, is that proper incorporation of well drafted STCs remains critical to the protection of a business, particularly where a claim arising from negligence or some other contractual obligation has occurred.  In those circumstances, well-constructed STCs provide essential cover to a business and delineate its liability exposure.

As a bare minimum, STCs should include provisions which cover aspects such as:  the scope of the services to be rendered, the basis of liability (in other words whether it is negligence based or in terms of strict liability), limits of liability, the relevant time periods for notification of claims and/or the commencement of legal proceedings, and appropriate law and jurisdiction clauses.
It is also essential in most jurisdictions, and indeed also in South Africa (particularly under the auspices of consumer related legislation such as the Consumer Protection Act, 2008), that businesses provide their contracting counterparty with sufficient notice that the contract is subject to its STCs prior to conclusion of the contract.

The simplest method would be to conclude a written and signed contract that specifically includes the STCs.  It is also essential that the provisions of the main contract and the STCs properly marry each other to avoid any conflict, or alternatively, to provide for a clear mechanism dealing with a situation where any conflict arises.

No business, however, and the transport and logistics sectors are certainly no exception, operates under a vacuum.  Contracts are often concluded by a mere exchange of emails or even telephone conversations, which are subsequently reduced to a booking note.
It is essential that STCs are properly incorporated and staff should be adequately trained to ensure that they are fully au fait with the importance of the business’ STCs and how to ensure that they apply in all contracts which are concluded.

Where margins are tight, failure to adhere to basic good practice can have disastrous consequences for a business, even more so where the failure has prejudiced its insurance cover, leaving a company effectively uninsured for the event. Should the ensuing liability be large enough, such a scenario could even prove to be the proverbial end of the road for a company.

In today’s tough economic times companies look to reduce costs and so are naturally reluctant to incur what they deem to be unnecessary legal costs in seeking to review their STCs.   Such an approach, whilst seemingly cost effective, may however ultimately prove to be costly, if not disastrous, in the long run.

Shepstone & Wylie’s shipping, logistics and customs lawyers are a team of proficient professionals who can consider such aspects to limit, or as far as possible reduce, a company’s exposure and so seek to ensure that it is not caught red faced (and out of pocket!) should calamity arise.