Terms of Trade - Too Easy to Underestimate - Contract Lawyer Auckland - Dukesons Business Law

July 2017

    This Blog isn't legal advice – if you need legal advice on any business law or commercial law issue, please contact me. I'm a business lawyer (commercial lawyer) in Auckland who provides advice on contract law issues and on a wide range of business law or commercial law issues.

    At least in terms of my work, Terms of Trade have been one of the “flavours of the month” this year. The consequences of not getting them right can be severe.

    It isn’t uncommon for a client to request that these kind of documents be short and simple. Particularly with Terms of Trade, there’s a misconception that they’re basically a standard form of document that shouldn’t require too much effort to put together.

    Terms of Trade (and Supply Agreements) are usually a trader’s core document. They need to be considered carefully so that they are practical as well as dealing with the legal issues – it’s crucial that they reflect the way in which the trader will trade with their customers. That means that they need to be tailored to each trader and the way that each trader operates, and tailored according to whether or not they are online terms. I’ve reviewed many Terms of Trade that don’t accurately reflect how the trader operates.

    To avoid disputes and inappropriate claims, it’s important that Terms of Trade cover off all of the issues that are likely to be important, both legal and practical. There’s a lot of them. It’s also important that Terms of Trade be regularly revised, because they can fall out of date either because of changes in legislation or as a result of case law or because of changes in the way in which the trader operates.

    Though lawyers would find it difficult to believe, I’ve had two instances where parties who supplied goods/products left themselves open to attack by not complying with the PPSA (it’s only 17 years old). In one case, they had registered a financing statement but they hadn’t got the customer to agree in writing to the Terms of Trade. In the other case, they had got agreement in writing but didn’t register their financing statement within the time prescribed by the PPSA to get the best priority that they could. In both cases, they could suffer if their customers become insolvent owing them money.

    Another client was using Terms of Trade (provision of services) that were barely a page long and that didn’t include a number of key terms. Some of the terms weren’t appropriate to their business at all. They had put the Terms together themselves by copying and pasting various parts of different terms that they had found online. The Terms requires a lot of work to get them right.

    In another set of Terms that I reviewed, there were a number of exclusion and limitation clauses that weren’t appropriate for what I call “true consumer customers”. The provisions contravened the Consumer Guarantees Act and probably contravened the Fair Trading Act (in that some of the terms would have been deemed to have been unfair contract terms).

    Some differences in wording are required depending upon whether or not terms are being used online. For online terms, consideration needs to be given to how the Terms interact with other content on the website.

    Some of these comments apply to all core documents that a business uses e.g. website terms, supply agreements, service agreements, etc. They need to be kept up to date and they need to be practical as well as covering the legal issues. It's better to invest in good documentation at the front end than pay the price for poor documentation later.

    It's the old story - you get what you pay for.


    • contact me if I can help you with your Terms of Trade or with any other contractual or other business law or commercial law issue;
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