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Prevention is better than cure- your terms and conditions of trade are the cornerstone of all sales. Ignore them at your peril.

To most people the thought of spending money for the preparation of an effective terms of trade document or credit application is not particularly appealing, especially given that the cost for a customised terms of trade document as opposed to a “one size fits all” version can be significant. I mean, why not just draft it yourself? It’s not that difficult right?

Unfortunately, it’s not until things go pear-shaped that the consequences of doing it yourself or trying to save a few dollars become apparent. What needs to be borne in mind however is that investing in an effective and well considered terms of trade document can save you a significant amount of money in the long run and potentially pay for itself very quickly.

Here’s a few terms that you should consider including:

1. Recovery of debt collection costs – a lot of people simply tack a clause onto their invoices thinking this allows them to recover it. Unfortunately, it’s not that simple. You are on much firmer ground if you put it in document and get the customer/client to sign it.

2. Charging clauses – If the debtor or guarantor owns real property, one of the most effective ways to secure payment is to register a caveat against it to secure payment of a debt. In order to do this you need a signed agreement that specifically gives you the right to do so.

3. PPSR clauses – A lot of terms of trade documents still contain retention of title clauses. These clauses can be problematic and have unintended effects as they were not drafted with the Personal Property Securities Act 2009 (Cth) in mind (presumably because it did not exist at the time). If you’re supplying goods on credit you should be registering a security interest on the Personal Property Securities Register to protect your interest in the goods.

4. Personal guarantees – if you’re extending credit to a company this is a must. Corporate insolvency is a very real issue. Don’t be left in line with the other creditors if the company goes into liquidation. Make sure you give yourself every chance of recovering your debt that you can.

5. Interest on overdue amounts – as with debt collection costs a lot of people simply tack a clause onto their invoices thinking this allows them to recover it. There may be an argument for that, but why not put it in document and get the customer/client to sign it? Then it’s difficult to argue they didn’t agree to it.

Need some solid advice. Contact Luke Gunthorpe.

luke.gunthorpe@stratoslegal.com.au 07 3152 4403