We regularly advise clients who have been left out of pocket by poorly drafted terms and conditions of trade or terms that have not been updated as the client’s business has evolved or expanded.
To avoid finding out after a problem has arisen that your terms of trade don’t protect you well enough, here are some issues that arise regularly.
Account Opening
You must have a clear process for opening accounts. This will allow you to make sure that terms and conditions of trade are agreed, key paperwork is signed and basis due diligence into your new client and their creditworthiness is undertaken.
Caveats
A caveat is a formal legal notice that can be placed on the customer’s property title. A caveat can prevent the customer selling the property or refinancing before having your caveat removed – which means in practice that they have to pay you.
However, you can’t lodge a caveat unless you have legal grounds to do so. One way to create the grounds to lodge a caveat is to include in your terms and conditions of trade a clause whereby the customer charges their property with any money that they owe you from time to time. Another way, where you are working on their property, is to include a provision that allows you to enter the property and remove the items that you have installed.
Personal Guarantees
If you are dealing with clients that are companies, you should ensure that you get personal guarantees from the directors. This can help if the company becomes insolvent or if it never had any assets.
Title Retention and PPSR
If you are selling goods you should ensure that your terms and conditions of trade provide that you remain the owner of the goods until you are paid. It also helps if you have the right to enter the client’s premises to remove your goods if you aren’t paid. You should also consider whether you need to register your rights on the Personal Property Security Register.
Intellectual Property Rights
If you are selling services you should ensure that you retain the intellectual property rights in your work. This may allow you to prevent the client using your work without paying you. Even after you are paid it may be wise to stipulate that the client only has a right to sue your work whilst you retain ownership of the rights.
Concluding Comments
A little care at the outset can make all the difference if things go wrong later on – and may be the difference between recovering what you are owed and a nasty write off.
Feel free to contact Lewis O’Brien & Associates to review your terms and conditions of trade. We believe that it will be one of your better investments!