As a consumer, when was the last time you read the Terms of Trade on the back of an order form or when you bought online? And turning that around, as a business owner, how familiar are you with your own Terms of Trade for the goods or services you sell? When was the last time you updated them?
Both buyers and sellers can often plead guilty to not taking much notice of the Terms of Trade, but when you’re the seller of goods or services, it’s important to protect your interests and eliminate the ambiguity that becomes the source of legal disputes down the line. The first step is a written Terms of Trade that protects your right to be paid in full for the goods or services you offer.
They should be written in clear, plain English and will normally be no longer than a single A4 page (such as on the other side of an order form). If you’re selling online, you should have the Terms of Trade published clearly on your website.
While there are many standard clauses that should be included in your Terms of Trade, here we focus on your right to ownership of goods until full payment and the enforcement of that right.
Think about your ownership rights
Retaining ownership in goods after the purchaser has taken possession will help secure payment. This type of clause is commonly referred to as a ‘reservation of title’ or a Romalpa clause. They need to be explained to the consumer to be enforceable under the Consumer Guarantees Act and this can be as simple as requiring a signature on your order forms. Customers should always be given a copy of the Terms of Trade they have agreed to.
The same applies for online sales. Electronic order forms on websites should contain a link to your Terms of Trade along with a notice stating that the purchaser agrees to be bound to them by completing the order online. A copy of the Terms of Trade should be emailed to the buyer as an attachment to the order confirmation email.
Personal Property Securities Register
If you need to reclaim goods from the purchaser’s premises, a retention of title clause, by itself, does not give you the right to take them back. Ideally, your Terms of Trade should outline rights to register a notice on the Personal Property Securities Register (PPSR), which is a good idea for large transactions. The PPSR is a simple public register which allows companies to publicly notify an interest over certain property and its best done prior to the buyer taking possession so that you secure your priority over other creditors. This is the key to securing additional rights to goods no longer in your possession, including the right to repossess them if the purchaser defaults (with some exceptions). To register a notice on the PPSR you can go to http://www.ppsr.govt.nz/cms
So be prepared and make sure you have robust Terms of Trade before you need them. Speak to a solicitor if you’d like some guidance and be sure to put it on your short-term ‘to do’ list.
For more information contact Mark McKitterick, Solicitor at Pitt & Moore
DDI: 03 545 6715