What are “terms of trade”?
“Terms of trade” are the terms of the contract between a seller of goods or services and the buyer.
The terms can usually fit on one A4 page, and therefore they may be placed on the reverse side of an order form or of an application for credit.
Because these terms are the terms of the parties’ contractual obligations to each other, you cannot vary the terms without the other party’s agreement.
Why have terms of trade?
Many businesses supply goods and services on the basis of informal arrangements, and often disputes arise that could have been avoided if there had been clear, written terms of trade from the start.
In particular, having clear terms of trade is an excellent way of minimising and preventing bad debt.
Make sure the other party signs the terms of trade
If you have written terms of trade, it is important that the other party be made aware of them and agrees to them. The best way to do this is by getting the other party to sign the terms of trade before the goods or services are provided.
When standard terms of trade are not suitable
Standard terms of trade won’t be suitable in all cases. For example, if you have a complex arrangement that will include matters not covered by your terms of trade, you will need to draw up a specific contract for that arrangement.
Other ways to prevent bad debt
There are a number of other things that you can do when allowing credit in order to prevent or minimise bad debt. For more advice on this, contact me directly.
Area Manager – Wellington