Why have terms of trade?

No matter how carefully you run your business, whether you are small or large, a sole trader, partnership, or company, there may come a time when you need to rely on your terms of trade for protection. Also known as terms and conditions and business terms, terms of trade set out the essential terms on which parties do business with you. They are primarily designed to protect the business providing goods or services from potential risks and mitigate the risk if problems do arise.

Drafting terms of trade can seem like low priority with everything else to get organised. Verbal agreements are binding and (with some exceptions) contracts do not have to be written down. However, relying on verbal agreements or basic written quotes is more likely to lead to confusion, mismatched recollection, and difficulty proving what was promised. Agreeing to terms of trade up front will ensure certainty so both you and other party understand exactly your obligations and reduce issues down the track. The more personalised your business terms of trade are, the more likely they will provide you the protection and contract tools you may need.

What matters do terms of trade deal with?

Some of the matters that you may expect your terms of trade to deal with are: definitions of the product/service you are offering, limitations of your liability, payment terms, delivery timelines, when ownership (of goods) transfers to the customer, refunds or returns, any warranty or guarantees, privacy statements, dispute procedures, force majeure (protecting your business from unforeseeable circumstances that prevent you fulfilling the contract) and other general contract provisions. There may be industry specific and product or services specific considerations also.

Contract formation – making sure the terms of trade apply!

Businesses usually need to ensure that their terms of trade are specifically agreed to by the other party before a transaction takes place. Your terms are unlikely to be binding on the other party if you simply have terms of trade available on your website or attach your terms of trade when you send an invoice upon completion of a transaction - at that time legally the contract has already been formed so most likely you would be unable to rely on them.

Need some help?

We are happy to help you draft terms of trade tailored to your business, to review and update your existing terms of trade if they have been in place for a while, or to review your contract formation processes to ensure that your terms of trade are binding on your customers and protecting you. Please book your no obligation discussion here: https://www.rachelwebster.co.nz/contact