Quick Tips: Terms and conditions of Trade

Are your terms and conditions of trade up to date? Do you know what they should include, and who should have them?

All businesses supplying goods or services in trade should have standard Terms and Conditions of Trade (Terms)

In the case of goods, Terms have the following key elements:

  • when payment is due
  • in-default interest at a stipulated rate
  • risk passes on delivery but ownership does not until payment
  • the right to recover the goods (including access to premises) and costs if the buyer is in default or broke
  • if the goods are resold by the buyer prior to payment the proceeds are held by the buyer on trust for you
  • where payment is deferred you have a “purchase money security interest“  in terms of the PPSA, and you should register a “financing statement”
  • you are not liable for any delay in delivery and the buyer cannot cancel unless delay is unreasonable
  • the buyer relies on its own judgment in respect of the goods, not any representation, and advertisements and catalogues etc are by way of general description only
  • excluding warranties under the Consumer Guarantees Act 1993, limiting liability to supply of replacement of defective or damaged goods or refund of the price, no liability for consequential loss, and time limit for any claim
  • (where credit is extended) the right to make credit enquiries

In the case of services, a number of the above elements are the same but there needs to be statements as to the timeframe, quality of the services supplied, the right to suspend the services if payments are not made, and any dispute resolution process.

How and when to adopt Terms:

  • You cannot unilaterally impose the Terms on existing relationships. Ideally you need written agreement from the buyer that all future dealings are governed by the Terms.  At the very least the buyer needs to be advised in writing that all future dealings will be subject to the Terms.
  • Many traders say on their invoices/statements that interest will be charged on overdue accounts. Unless the buyer has agreed that interest may be charged, interest is not recoverable.  A legal contract arises as soon as you agree to sell and the buyer agrees to buy  and that contract cannot be altered unilaterally, including by the inclusion of interest.
  • Where credit is to be extended, you should require them to complete a credit application form.  If the buyer is a company the form should include a personal guarantee by the principal of the company.
  • Where quotations are given there should be written acceptance from the buyer.
  • The Terms should be referred to prominently on quotations and credit applications so there is a signed acknowledgement by the buyer they are accepted.

Pitt & Moore can help with all Corporate and Commercial law matters.
This article is a general overview and is not a substitute for legal advice tailored to your specific circumstances. 

Mick Hollyer
Active Consultant
DDI: 03 545 6718
Email: mick.hollyer@pittandmoore.co.nz