Commercial Law - Terms of Trade
October 2013
In early Bulletins we have spoken of the importance of the “rules of the game”. This article is not about the underlying structural documentation important to set the rules of the game for any individual business or entity such as the constitution and shareholders agreements. Instead it focuses on the next layer of rules, the rules under which you do business when dealing with other entities.
Frequently we hear it stated proudly that “our terms of trade are no more than half a page”. Brevity or length of terms is not the issue. The important thing is that they be clear and reflect the way in which your business wishes to do business with its external business partners.
Some tips for this I offer are:
(a) Usually one’s terms of trade are out of date the very day you finalise them, simply because changes in the legal environment and the commercial environment occur at a rapid pace. Therefore you must constantly keep them under review and that should be the role of one person in particular to ensure that it is not forgotten.
(b) Recognise that your terms of trade will not necessarily be acceptable to other contracting parties. Again have a person who is responsible for vetting any departures from your terms which might be necessary to fit in with somebody else’s terms of trade. We cannot all be experts in all things and it is desirable to have someone in your organisation who develops a higher level of expertise in this. That person will also normally be authorised and know when it is necessary to check by reference to external legal advisors, whether any particular elephant traps exist.
(c) Remember that “one size does not fit all”. When you are dealing with an unusual one‑off arrangement, it will invariably need to have particular terms worked into it.
(d) If there is any possibility of you doing business online, then your terms of trade should be on your website with appropriate links to ensure that there is acknowledgement that the terms are adopted. Likewise in any placing of any order and acceptance, there needs to be a clear definition of when the contract was accepted and the terms of trade adopted. This is sometimes done simply by orders incorporating a copy of the terms and acceptance of them by the other party by email or letter. Whilst oral acceptance is generally enforceable, it sometimes also lacks clarity and so written confirmation (with order numbers if applicable) should be sought.
(e) Don’t forget that the terms of trade are nothing if the party with whom you are contracting is not financially able to meet their obligations. Appropriate credit checks and payment arrangements are essential.
(f) If you encourage people to use your website as part of your day to day business, for example with catalogue, pricing and other information, then your website terms and conditions need also to be kept up to date. These may be incorporated in your terms of trade or may be separate.
(g) Don’t forget privacy policy requirements when looking at your website terms and conditions as well.
(h) Other matters that you need to consider are to ensure that you adequately disclose any industry memberships or government licensing arrangements you may be part of.
(i) Remember that there are laws such as those in the Competition and Consumer Act that regulate commercial behaviour in such ways as anti‑competitive contracting, price regulation and consumer protection.
(j) Finally, don’t forget that there are many warranties that cannot be excluded. If you are looking to limit your liability in your terms of trade, then you should do so with appropriate legal advice because purporting to exclude a warranty (for example) that may not be able to be excluded can of itself constitute misleading and deceptive conduct under the Australian Consumer Law.
This article is not intended to be anything other than thought provoking and is intentionally not a comprehensive treatise. We welcome feedback and are happy to talk to anyone who might wish to seek some elaboration on anything raised in this article.
John Graves
Principal
Bradfield & Scott Lawyers
Level 1, 175 Macquarie Street
Sydney NSW 2000
Telephone: 9233 7299
Email: jgraves@bradscott.com.au
Frequently we hear it stated proudly that “our terms of trade are no more than half a page”. Brevity or length of terms is not the issue. The important thing is that they be clear and reflect the way in which your business wishes to do business with its external business partners.
Some tips for this I offer are:
(a) Usually one’s terms of trade are out of date the very day you finalise them, simply because changes in the legal environment and the commercial environment occur at a rapid pace. Therefore you must constantly keep them under review and that should be the role of one person in particular to ensure that it is not forgotten.
(b) Recognise that your terms of trade will not necessarily be acceptable to other contracting parties. Again have a person who is responsible for vetting any departures from your terms which might be necessary to fit in with somebody else’s terms of trade. We cannot all be experts in all things and it is desirable to have someone in your organisation who develops a higher level of expertise in this. That person will also normally be authorised and know when it is necessary to check by reference to external legal advisors, whether any particular elephant traps exist.
(c) Remember that “one size does not fit all”. When you are dealing with an unusual one‑off arrangement, it will invariably need to have particular terms worked into it.
(d) If there is any possibility of you doing business online, then your terms of trade should be on your website with appropriate links to ensure that there is acknowledgement that the terms are adopted. Likewise in any placing of any order and acceptance, there needs to be a clear definition of when the contract was accepted and the terms of trade adopted. This is sometimes done simply by orders incorporating a copy of the terms and acceptance of them by the other party by email or letter. Whilst oral acceptance is generally enforceable, it sometimes also lacks clarity and so written confirmation (with order numbers if applicable) should be sought.
(e) Don’t forget that the terms of trade are nothing if the party with whom you are contracting is not financially able to meet their obligations. Appropriate credit checks and payment arrangements are essential.
(f) If you encourage people to use your website as part of your day to day business, for example with catalogue, pricing and other information, then your website terms and conditions need also to be kept up to date. These may be incorporated in your terms of trade or may be separate.
(g) Don’t forget privacy policy requirements when looking at your website terms and conditions as well.
(h) Other matters that you need to consider are to ensure that you adequately disclose any industry memberships or government licensing arrangements you may be part of.
(i) Remember that there are laws such as those in the Competition and Consumer Act that regulate commercial behaviour in such ways as anti‑competitive contracting, price regulation and consumer protection.
(j) Finally, don’t forget that there are many warranties that cannot be excluded. If you are looking to limit your liability in your terms of trade, then you should do so with appropriate legal advice because purporting to exclude a warranty (for example) that may not be able to be excluded can of itself constitute misleading and deceptive conduct under the Australian Consumer Law.
This article is not intended to be anything other than thought provoking and is intentionally not a comprehensive treatise. We welcome feedback and are happy to talk to anyone who might wish to seek some elaboration on anything raised in this article.
John Graves
Principal
Bradfield & Scott Lawyers
Level 1, 175 Macquarie Street
Sydney NSW 2000
Telephone: 9233 7299
Email: jgraves@bradscott.com.au
