You have a great business with a great product and/or services but how good is your legal protection when it comes to getting paid? Businesses that have solid legal Terms of Trade documentation can trade with the assurance that the law is on their side.
- Are you really protected by your Terms of Trade?
- Would you like to minimise your risk of bad debts and their time for recovery?
- Do you know your rights and responsibilities under the Personal Property Securities Act 2009?
Terms of Trade also known as “Terms and Conditions”, or “Payment Terms” are the ‘rules’ a business sets by which the public can purchase their goods or services by.
When running a business, it is important to ensure that you have Terms of Trade that are clear and concise. Having a well drafted set of terms and conditions that includes clear payment terms is a great way to avoid disputes, reduce bad debt and can greatly assist with debt recovery.
Over 19 years of working as a lawyer, I have seen many different Terms of Trade, some good and many not so good. Clients have often told me that they have copied their terms from a competitor, amended from another business they have dealt with or simply downloaded them from the internet. One business’s Terms of Trade, that I recently saw, was clearly not prepared by a qualified lawyer. It contained some terms that were supposed to define specific conditions but the business had failed to include these definitions in its terms. They had copied only part of someone elses Terms of Trade. This meant that a crucial part of their Terms of Trade did not work and is likely to cost that business dearly.
In another matter, an electrician had installed tens of thousands of dollars of electrical wiring and lighting into a supermarket. The supermarket went into liquidation just before the electrician’s work was completed. The electrician had not yet been paid. The electrician had a term on his Terms of Trade that ownership of the materials remained the electrician’s until they were paid for. However, as the electrician had not updated his terms of trade with the introduction of the Personal Property Securities Act 2009 (“PPSA”) he lost both the materials and the ability to get paid. The PPSA required for the electrician to register his ownership of the wires and light fittings on an online registry. This right should be expressly written in your Terms of Trade.
So what should be included in your Terms of Trade?
Important considerations to include in Terms of Trade:
- When payments are due and methods of payment
- Penalties and charges
- GST inclusion
- Delivery and passing of risk
- Ownership (“PPSA”)
- Security and signing
It is important that these provisions are drafted properly, to make it very clear what the obligations of each party are. This will help to simplify and speed up any debt recovery that is required as there is less to argue about.
In your Terms of Trade, that your customers sign up to, it is important that you include provisions that will offer you the maximum protection under the Personal Property Securities Act 2009 (“PPSA”) and ensure that you are compliant with the Competition and Consumer Act 2010 (“Consumer Law”) and Privacy Act 1988 (“Privacy Act”) to name but a few.
Properly constructed Terms of Trade can streamline your debt recovery process, it will protect your business and ensure that you comply with the relevant laws and obligations.
Businesses that rely solely on informal agreements which do not clearly state each party’s obligations, will often run into trouble when attempting to recover debts which can lead to costly disputes. Prevention is always better than the cure, get your Terms of Trade correct from the outset and run your business with the peace of mind that the law will be on your side when it comes to any of your trading issues.
Do you need assistance?
To get a “health check” on your current Terms of Trade or to get assistance in creating a Terms of Trade that are specifically tailored for your business, talk to one of our commercial lawyers at Lynn and Brown Lawyers on 9375 3411 or contact us https://www.lynnandbrown.com.au/contact/