Protection and Collection
Terms and Conditions of TradeNRC use specalist Lawyers to draft customised Terms and Conditions of Trade (TRADESMART). No two businesses are the same, so we believe it is imperative to provide legal documentation that is designed for the business and will stand up and be counted. We at NRC are also committed to instructing our clients in the how to. Our clients then become empowered and stronger in protecting their business asset.
What I need to know about Terms and Conditions of Trade (TRADESMART)
The most common observation in the New Zealand small to medium business market is that most trade with vague or incomplete written Terms and Conditions of Trade. You leave yourself open to profit loss, disputes and serial debtors taking advantage of you with no clear written procedures or consequences. Taking the time to make an informed decision and implementing specific and comprehensive Terms and Conditions of Trade can help ensure that your business risk is minimised and managed. NRC is the market leader at drafting Terms and Conditions of Trade (TRADESMART) via specialist Terms and Conditions lawyers. At NRC, we take the time to train business people how to understand them as well as show them how to deliver them to their customer for acceptance.
What aspects should my Terms and Conditions of Trade cover?
Your Terms and Conditions of Trade should provide comprehensive cover over a range of issues that create protection for your business. There are up to 52 Acts of New Zealand Law that have been drafted. If you trade with less, you are not fully protected. One of our clients described it this way; it's like opening the front door for your customer to enter, pick up goods and walk out the back door leaving you with no gratuity and half a leg to stand on. No one in business we have met yet likes working for nothing, they certainly don't like losing profit and even less, like being stolen from.
Some of the most common risk areas include:
Firstly, no paper trail or poor paper trail. (Quotations, Applications for Credit etc)
Secondly, Missing or poorly written Acts of Legislation / Terms and Conditions
- Unclear or no payment terms;
- Unpaid debts with no ability to collect and add penalties;
- Exposure to liquidation and no ability to place securities;
- Disputes with no process for resolution;
- Incurring liability for negligence or breach of contract;
- Owners and directors not incurring personal liability;
- Damage to goods during delivery process;
- Ownership of goods and no rights to repossess;
- No ability to cancel contracts;
- No ability to vary contracts;
- No refunds, returns and warranties process;
- Privacy Act exposure;
- No limitation of liability;
Thirdly, copying another businesses Terms and Conditions of Trade.This is a practice that some do it your self business people do. The dangers here are many and very valid.
- Copyrights may be breached. Need we say more!
- The legislation required may not be present thus leaving holes and gaps.
- The legislation may be out of date and useless.
- The Terms and Conditions are particular to the original business and don't cover the copier at all. Full exposure and risk to the unsuspecting user. The Terms then become null and void.
- Terms and Conditions are a specialist part of law, many lawyers do not practice this part of law, and the copy cat, do it yourself business owner, may find them selves coming to grief because they don't know what they don't know creating a false sense of security.
The smart business owner addresses these issues and manages these risks in their business by having personalised and clear Terms and Conditions of Trade. One of our clients was extremely relieved to recover monies because he did as we taught him. He placed securities over his goods and got paid. The process is as simple as installing Terms and Conditions of Trade into your business process; you just need to ensure that the Terms and Conditions of Trade are delivered to your customers' prior to the delivery of goods and services. Their acceptance prior to you extending credit to provide goods or services is desirable but not essential, and this can be facilitated via several methods. This same customer had just upgraded their Terms and Conditions; they had believed that their current Terms were adequate. We at NRC recommended they have an audit completed, the audit revealed a shock value of unknown risk, gaps and holes that needed urgent attention.
The purpose of your Terms and Conditions of Trade should be to expressly deal with these risks and commit your customer to agreements as to what happens if any of these risks occur or negotiations need to be entered into.
How can I ensure my Terms and Conditions of Trade are in place and accepted?
There are many options how to install / deliver your Terms and Conditions of Trade.
If you provide quotations, this is the ideal place for your Terms and Conditions of Trade to be delivered. Quotations are often delivered via many formats.
The options usually include the following.
Terms and Conditions of Trade printed on the back of the top copy posted or hand delivered and ideally having a sign off process.
Terms and Conditions of Trade printed on the back of the top copy, duplicates retained with a sign off process.
Terms and Conditions of Trade faxed with quotation and duplicate copy posted (hard copy) or hand delivered. Or request a fax back option that is signed off. This gives you evidence that the customer saw and accepted your Terms and Conditions of Trade before the contract began.
Quotation preferably sent as a locked PDF with Terms and Conditions of Trade included as a whole complete document.
Getting these processes clear and constant makes things clear right from the start and will hopefully mean no misunderstandings or disputes later. Getting into the habit of always using them is a must. One of our clients didn't use theirs and didn't place PPSR securities over their goods, end result, the business they traded with defaulted and they lost over 40k. You do the maths, how many sales do you need to do to make up the lost income and profit? If your net profit is under 10%, you have to do 10 times plus sales, to make up the difference and do it working for nothing. For our money, protection is far better than an ambulance trying to rescue the dead. If a client is scared off by your Terms and Conditions of Trade, the obvious question to ask yourself would be - if they have every intention of paying as agreed, what's the concern? Maybe it is a client you wouldn't want to have anyway!
Application for Credit
Using this option is one of the most effective methods of installing your Terms and Conditions of Trade.
This form asks for information about the intended customer, eg names, contact details, dates of birth, how long they have been trading, who has authority to make decisions, possible referees (though we believe this can give false sense of security, who would deliver to you a referral of someone you had traded with inappropriately?) Have Privacy Act waivers for credit checking ability, in our opinion this is an essential option when risk exposure is obviously there. Spend your time and money here, and receive an independent and unbiased snapshot. Know exactly the history and nature of your unknown customer before you commit to a business relationship. Far too often the horse has bolted and you get left with a red face and empty pockets.
We at NRC also recommend personal guarantees / directors guarantees be added in this process. If the company goes into liquidation or bankruptcy, a PG gives you another option to recover your loss.
One of our clients came to us and wanted a debt collected, when we identified the debtor and found that the business was being liquidated we had the unfortunate position to say sorry, nothing can be done. Our client then unveiled a Personal Guarantee and inquired will this do the job. The story ended happily as the PG was activated and monies were extracted from what was or could have been a substantial loss.
Your Terms and Conditions of Trade should specify when the agreed price is to be paid. This can vary depending on what agreement you as a business accept. You may have account customers and credit is acceptable, others may be with no account or credit facility and payment is expected upon delivery / completion. You may also require a deposit; it is a requirement to stipulate this. You also need to state the consequences for default or late payment. Being able to on charge collection costs, legal fees; interest and administration charges should be clear. If these are not present or stated, you can not add them on. The Commerce Commission monitors this and any breaches expose you to a fine of up to 200K. The Terms and Conditions of Trade should also stipulate your ability to place security for any goods or services you supply on credit. This security should be given in a format that complies with the Personal Property Securities Act 1999. The written clauses need to cover all the aspects here to comply with the PPSA legislation. For more information regarding PPSA PPSR go to our link.
PPSA / PPSR
In our opinion, one of the most effective tools to protect your business assets and cash flow is securities place on the PPSR. The PPSR has replaced the Romalpa clause which gave limited protection. If you suddenly find yourself facing the impact of a liquidator's letter telling you that you are an unsecured creditor, you will be forced to join the ranks of the unsecured creditors with minimal chance of being paid if at all. Many business owners we have connected with are angry, disappointed and disillusioned because they have had the hard pill to swallow knowing what they now face. Had they known about or used PPSR, the story may be very different. PPSR gives you a chance to secure your assets and not loose them. It also places you in a preferential position to get paid; sometimes you can be in front of the financial institutions. Sadly there are no guarantees, trade with a predator at your own peril (credit checks are worth there weight in gold) but by using PPSR, you increase your protection. Far too many business owners we speak to, when asked about PPSR reply either, what's that? Or I've heard of it, how does it work? or they know about it and are not using it effectively. At NRC, we instruct on how to use PPSR and get it right.
Contact us at NRC and find out how PPSR works!
Delivery and Risk
Your Terms and Conditions of Trade should state when risk passes to the customer. Most common is when goods leave your premises, but other options may be considered. You need to state who accepts the cost if goods are damaged while being delivered and / or if there are any delays in completing delivery.
Insurance liability is also a consideration, when is the customer liable for the items delivered and under what circumstances.
Ownership and rights to enter and repossess
You must state this categorically on your Terms and Conditions of Trade. Failure to comply here by not stating ownership may cause you to lose your right to your goods. It is also imperative to place PPSR securities over your goods to protect the ownership rights and make a clear and identified claim to them. This must be drafted and written correctly in your Terms and Conditions of Trade, it must also follow the correct process for accurately creating a financial statement on the PPSR. Get either of these steps wrong and you may find yourself extremely disappointed when they fail to deliver. Far too many Terms and Conditions of Trade fail to have this drafted correctly. Using the TRADESMART Terms and Conditions of Trade, you will have this done properly. One of our clients placed PPSR securities over goods and was shocked when a liquidator declined their claim. The process was wrong, the information was incomplete.
No ability to vary contracts
It is essential that if something changes in the sales, contract process, that you have options for altering or varying the terms. Failure here may leave you stranded and facing a loss and or working for nothing. From the opposite, customers may wish to alter the deal, having a variation process is necessary; document what is being agreed upon. We had a client do some building work, the customer wanted extras, builder happily obliged with no paper work. Submitted an additional invoice, had a dispute, went to court and lost. Lesson, do the paper work, have the Terms and Conditions of Trade in place prior to the variation of the initial quotation. If you don't like doing paper work, you'll like it even less if you lose. At NRC we help make this process simple and easy. The TRADESMART documentation includes these steps, if you already have these steps, we may be able to enhance them if they are lacking.
Contact us at NRC and find out if your procedures are adequate.
Why is the Privacy Act important to comply with? If you want information and want to do your due diligence, this is a must. We have clients wanting Credit Checking facilities to establish whether their prospective customer is a good credit risk. An excellent decision on their part, first question we ask at NRC is, do you have permission of the person or company? If they say no, they have no Privacy Waiver Privacy Act clauses, they cannot access private and confidential information. End of story. The penalties for breaching the privacy of an individual or company may be up to 200k. When a credit check is done, it is a permanent record. If you have done a credit check without the appropriate waivers or correctly worded legislation, you may find yourself in trouble. If this is of value to your business credit process, get it right. NRC can help here with making sure you either comply already, or helping you get compliant.
Limitation of Liability
Your Terms and Conditions of Trade should limit your maximum liability, failure to do this may expose you to hefty law suits which are time consuming and expensive. You want to make it clear that you cannot be held liable for your customer's loss of profits or any other losses. You should also make it clear where you stand and what your policy is relating to replacement or refund of any defective item supplied. Warranties and deadlines should be stated, and the process for claim, return, refund or replacement clearly written out.
Your clauses also need to be written to comply with the Fair Trading Act and the Consumer Guarantees Act. Where the Consumer Guarantees Act applies, you can still manage your risk by stating limits or conditions regarding the goods and services you supply; it is also wise to stipulate any items that are not included. We would recommend this to eliminate disputes and creating disgruntled customers.
Your Terms and Conditions of Trade should also excuse you from performance of your obligations to your customer if performance of your obligations becomes impossible because of an unforeseen event outside your control (such as an earthquake, terrorist act, or outbreak of war or acts of God).
How can NRC help?
Contact us now for a no obligation appointment to step you through how Terms and Conditions of Trade can be an asset and tool for your business. We can instruct you how to use them, we can have your Terms and Conditions of Trade professionally drafted by specialist lawyers (TRADESMART). The cost to have your terms won't break the bank, but an account or several accounts that are not collected have the ability to damage or destroy your business. Several of our clients hesitated and delayed in taking action, and some didn't take action at all, and now they do not have a business. Their income producing asset was stripped from them, and left them in debt because they couldn't pay their debts.
Call NRC now and be informed!
I have existing Terms and Conditions already
You may want to consider the option of an Audit.
This is a lawyer prepared audit and will confirm three things to you.
The Audit will confirm
- What Conditions / Acts of Legislation you currently have.
- What Conditions / Acts of Legislation you have missing.
- What Terms and Conditions you actually need to maximise the protection to safe guard your business.
Go to the following site to download an audit request form at the bottom of the page.
TRADESMART is the preferred business tool that discerning business people rely on!