NZ Terms of Trade

All parties who provide goods and services should have clearly written terms of trade. These terms should cover fundamental matters such as:

• the price of the goods or the fee for the service;
• the right for the contractor to recover goods if the customer doesn't pay;
• the right for the contractor to recover penalty interest and costs if the customer doesn't pay;
• the extent of the contractor's liability if there is a problem; and
• what law will apply (particularly important given the increasing use of the internet by customers to obtain goods and services).

These Terms of Trade need to be brought to the customer's attention before the work begins or the goods are provided.

Providing detailed terms of trade upfront can help to avoid costly disputes later on.

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Ownership and Risk
• Warning re Registration of Financing Statement under Personal Property Securities Act 1999
Records Management
• Is it necessary to retain a file on each Customer?
Credit Check
• Do I need the Customer's permission to do a credit check?
Liability
• What is the difference between entirely excluding and merely limiting liability?
• If I want to entirely exclude liability, should I get the Customer to sign or initial that clause?
• If I choose the limitation of liability, what level should I choose?
Limitation
• If I choose the limitation of liability, what level should I choose?

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Ownership and Risk

• Warning re Registration of Financing Statement under Personal Property Securities Act 1999

  If registration is not completed prior to or at the time of supply of goods on credit, then such registration may not be effective to protect you against the interests of a prior chargeholder in the goods. Accordingly, we recommend registration of a financing statement prior to supplying goods on credit.

  This hint is provided by Cavell Leitch.

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Records Management

• Is it necessary to retain a file on each Customer?

  Many service providers have professional obligations to retain detailed records.
  
  Many other businesses also wish to retain detailed records for the legal limitation period of six to ten years so that they have documents to defend themselves if a claim is made against them in relation to the goods or services provided to the Customer.

  This hint is provided by Cavell Leitch.

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Credit Check

• Do I need the Customer's permission to do a credit check?

  Yes, credit information is personal information and can't be accessed unless the Customer has agreed.

  This hint is provided by Cavell Leitch.

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Liability

• What is the difference between entirely excluding and merely limiting liability?

  Contractors can try to reduce, or fully avoid, being liable to their Customers, by including a limitation or exclusion clause in their Terms of Trade.
  
  A limitation clause is, in effect, the Contractor saying "if things go wrong, the maximum amount I'll have to pay the Customer is $xx".
  
  An exclusion clause is, in effect, the Contractor saying "if x, y or z goes wrong, I won't have to pay the Customer anything."
  
  Whether or not these clauses will ultimately be effective depends on a range of different factors. For example, if a Customer takes a Contractor to the Disputes Tribunal, the Tribunal has the power to ignore any limitation or exclusion clauses. Also, consumer protection legislation like the Fair Trading Act and Consumer Guarantee Act overrule limitation and exclusion clauses in certain circumstances.
  
  Ultimately, we recommend that Contractors include either a limitation or an exclusion clause in their Terms of Trade. However, Contractors need to realise that these clauses are not guaranteed to provide protection in the event of a dispute.
  

  This hint is provided by Cavell Leitch.

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• If I want to entirely exclude liability, should I get the Customer to sign or initial that clause?

  Yes, if possible, this is a very good thing to do. If you can show that the Customer specifically knew about the exclusion clause before they agreed to use the Contractor, then that will help the Contractor to enforce the exclusion clause if they need to later on.

  This hint is provided by Cavell Leitch.

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• If I choose the limitation of liability, what level should I choose?

  Consider what your relationship with the Customer will involve. The amount that you choose should be a reasonable reflection of the loss that the Customer may suffer if something goes wrong in the relationship. If the limitation of liability sets the limit at an unreasonably low level, then it is at risk of being struck out by a Court if the aggrieved party can show it is unreasonable.

  This hint is provided by Cavell Leitch.

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Limitation

• If I choose the limitation of liability, what level should I choose?

  Consider what your relationship with the Customer will involve. The amount that you choose needs to be a reasonable reflection of the loss that the Customer may suffer if something goes wrong in the relationship. If the limitation of liability sets the limit at an unreasonably low level, then it is at risk of being struck out by a Court if the aggrieved party can show it is unreasonable.

  This hint is provided by Cavell Leitch.

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This document has been prepared by Cavell Leitch