Setting out terms and conditions

September 22, 2016

Establishing your business’ terms and conditions may seem like an onerous task among the neverending to-do lists, but getting it right is essential for healthy cash flow.

Terms and conditions form the basis for the trading relationship on which a business sells goods and services to customers and from which they buy goods and services from suppliers. Specific terms
and conditions can be the difference from chasing up late payments to ensuring your business gets paid first.

Well-drafted terms and conditions will protect a business and provide clarity as to what should happen in any given situation. Terms and conditions can also prevent
disputes and save time and money on collecting debts.

While there is no legal requirement to include terms and conditions on invoices, it is highly recommended to establish written terms and conditions in case things
go wrong with one party. The terms and conditions you decide to incorporate will vary depending on your business’ needs but generally should include the following:

Goods and services
A clear definition of the goods and/or services that will be provided. Including a section for definitions of the words you use throughout your terms and conditions
will prevent any misunderstandings or misinterpretation.

Price and payment terms
The price should be defined and must state whether GST (or other taxes) are included or not. The payment terms should outline when the payment is due and if the price
is payable in cash on delivery or on preagreed terms.

Warranties or guarantees
Include any warranty that will be provided. The warranty period and limitations underthe warranty need to be clearly explained. If you offer any guarantees, be sure to
include them and remember guarantees should be provided before any goods and services are provided.

A timeline for the delivery of goods should be detailed. Ensure to include the method of delivery and any associated costs for delivery.

If credit is provided, include the credit terms, credit limit and any penalty or default terms. It is important to request permission to conduct a reference check
to check the creditworthiness of the other party before providing credit. Remember offering credit increases your chances of receiving a late payment, or not being
paid at all, so consider upfront payment or payment on delivery for customers with large payments.

Specify what will happen if either party does not deliver or pay on time. The terms should also state what notice is required to get out of an agreement or if one party
wants to end the relationship.

Retention of title clause
A retention of title (ROT) clause means that the seller can retain the ownership of goods already supplied until they have been paid for by the other party. Suppliers
must ensure to register their interest in accordance with the Personal Property Security Act to remain enforceable.

For more information, contact us at Leenane Templeton on 02 4926 2300 or email


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