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Terms of Trade - a solid backbone for your business relationships

By Mike Worsnop - 30 Mar 2011

Terms of Trade govern the way you do business with your customers. They're critical in regulating your business relationships. So you must get your terms of trade right and ensure they are enforceable when required.

Introduce your Terms Before you Start

Ideally potential customers should have a chance to review your terms before they begin trading with you. In practice, this often doesn't happen. Terms may be buried in the least accessible part of a business's website, or appear in barely decipherable print on the reverse of invoices.

However, if your customers haven't seen or had a chance to read your terms, they may provide little protection. Your customers can try to argue that because they were not made aware of your terms, they don't apply.

A good way to overcome this risk is to ask customers to sign and return your terms before you do business together. Providing your terms at the same time as a customer completes a request for credit is one way of doing this. Other good options for making sure that customers are at least aware that your terms exist include:

  • Pointing out the terms on your website
  • Having a noticeable sign at your reception
  • Putting a copy of your terms in the mail to new customers

Common Frameworks for your Terms of Trade

All sorts of provisions can be included in your terms. Common clauses include:

  1. Price and Payment
  2. Delivery
  3. Dispute resolution
  4. Retention of title/Security Interest
  5. Information and privacy
  6. Intellectual property
  7. Termination
  8. Warranties
  9. Cancellations
  10. Claims

Protect your Business by Keeping your Terms of Trade Up-To-Date

Review your terms regularly to make sure they are up-to-date and comply with the current law. Your terms should be a "living document" and so be able to respond to the needs of your business. Your terms shouldn't simply be done, ticked off and left to reside at the bottom of your bottom drawer.

Check that you're making the most of protections you can have under your terms and the law. For example, simply having a retention of title clause in your terms won't guarantee that you will retain ownership over goods which have been supplied to a customer but not yet paid for. (You must also have the right to register a security interest on the Personal Property Securities Register).

Well drafted, appropriate and properly implemented terms of trade provide a back bone to your business's sale of its goods and services. They provide certainty around the contract to both seller and purchaser.

If you'd like us to review your terms of trade or to prepare new ones please contact Andrew Nicoll or your usual contact at Martelli McKegg on 09 379 7333.


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