Contracts are the backbone of any business. Commercial contracts lay out the basic terms and conditions of any business transaction, and what you and other parties involved are obligated to do by law once the agreement is signed. Without contracts, the commercial industry and the people within it would constantly be in disarray and disagreement, which is why proper contract drafting is paramount to ensuring everyone acts fairly within any business transaction or relationship.
The same logic applies when it comes to providing goods and services. Businesses need to have written agreements with their buyers that outline the rights and obligations of both parties involved. These agreements and terms are found in the “Terms of Trade”.
Why is a Terms of Trade so important?
The Terms of Trade contains the parties’ contractual obligations to each other in clean, written terms that both parties are obligated to abide by. Establishing a terms of trade document for your business is a worthy investment to increase the likelihood of payment, to minimise and prevent bad debt, and to mitigate risk.
More often than not, people or businesses who supply goods or services without a Terms of Trade regret not drafting one once unfortunate circumstances arise that eventually lead to disputes.
What should be in the Terms of Trade?
Here are some of the most essential components for inclusion in a Terms of Trade:
- Involved parties and legal entities
- How orders are made and what constitutes acceptance
- How pricing is determined and how payment is made
- Any payable penalty interest if payment is not made by the due date
- The right to recover collection costs
- Copyright ownership of any contracted work
- When title in the goods passes to the purchaser
- When risk passes to the purchaser
- How delivery is made and who pays for delivery
- What constitutes default and the consequences of default
- Right of entry to repossess goods
- Time limit for advising defects
- Return policy
- Warranty exclusions
- Dispute resolution procedure
- Guarantee of customer
- Rights to proceeds if goods are sold
It is pivotal that the other party is made aware of the Terms of Trade and reads and understands all clauses before the goods or services are provided.
Get Professional Help from the Commercial Law Experts
When drafting a Terms of Trade, you’ll need to cover all your bases by getting qualified advice and professional legal services. Lawyers will help you with drafting, negotiating, or administering your Terms of Trade to ensure you can carry on your business with confidence and assurance.
As commercial law specialists with decades of experience, the team of legal advisers here at Gillespie Young Watson can help you sort out the big picture and the small print of your Terms of Trade. We provide a wide range of commercial legal services to help you put in place structures and documents that achieve your intended commercial outcomes.
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