What are terms and conditions

Terms and Conditions (T & C) set out the conditions which the parties will do business under. It is prepared by the business owners (Sellers or service provider). T & C is not a legal requirement however, more businesses nowadays use it as a front end tool to set out the rights and responsibilities of anyone using their services or purchasing their goods. T & C effectively forms the contract between the business and its customers. These terms and conditions are designed to protect the rights of businesses who sell goods or provide services to their customers. T & C is also known Terms of Service, Terms of Use, or Terms of Trade.

Who needs it, and why?

Does your business involve supplying goods and products to your customers? Does your business provide any specific service to your customers? If your answer is yes to either question, then T & C is definitely an essential tool for your business.

The purpose of the T & C is to clarify the rights and obligations of the parties, and clients like to know upfront the Seller’s or service provider’s terms. By having a T & C in place, it helps to reduce any misunderstanding between the parties and can also avoid disputes later down the track. It is also a very effective business tool for start-up business owners as the T & C helps to create consistency of arrangements across its customer base, it also prompts the business owner to think ahead on how to deal with potential liabilities and issues. Terms can also be used to limit potential labilities and provide some degree of security for recovery of debt following the supply of goods or services.

What should the terms include?

As your lawyers, we prefer to have a thorough discussion with you before we start drafting the T & C for you. We like to have a good understanding of how your business operates and whether there are any areas of risk we need to mitigate. We also need to be aware if there is any particular intellectual property issue to ensure that your T & C is well tailored to suit your business needs.

However, irrespective of the size or the nature of your business, we set out below some essential terms which should be addressed:

  • Definitions – a clear definition of what products or services are covered by the T & C.
  • Price and payment terms – usually in the price and payment terms you can specify your terms and can also reserve your right to review the price list from time to time without a need to notify the customer. More importantly, you can set out the payment terms including when the payment is due, outline any arrangements regarding prompt payment discounts and the charging of interest for late payment. The terms should also reserve your right to recover debt collection costs from the customer.
  • Orders and acceptance – T & C should contain clauses in relation to method of placing orders, terms about quotes (if applicable) and a clause setting out clearly that by placing an order constitutes the customer’s acceptance and understanding of the T & C and is therefore a binding contract between the parties.
  • Ownership of goods and Personal Property
  • Security Register – the T & C should address when the ownership passes to the customers particularly in the case where goods are delivered prior to payment being made. As the business owner, you need to ensure that ownership of the goods is retained until such time as payment is made in full. We can assist in drafting your T & C to ensure your rights to the goods are protected.
  • Risk and insurance – the passing of risk in goods should be addressed in the T & C so that the parties are clear on when risk passes from one party to the other, and both parties should be aware when they become responsible for insuring the goods.
  • Personal Guarantee from Company and Trust – as business owner, you may also wish to ensure that when the customer is a company, or trust, you consider a guarantee from the directors and/or shareholders. With such a guarantee, the guarantors will be personally liable for the debts incurred by the company.

There are many more protection clauses we can discuss with you when setting up T & C for your business. If your business does not have a T & C, we strongly encourage you to consider having one put in place. We would be happy to assist our clients to review their current T & C as legislation may change from time to time and it is always a good idea to ensure that your T & C is up to date and contains all the essential protection for your business.

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Contact Joy Yuan
Phone: (09) 486-9576
Email: joy@turnerhopkins.co.nz

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Published: Tue, Apr 3rd, 2018 by Joy Yuan

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