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What are terms and conditions and why are they important?

Terms and conditions set out the rights and obligations of parties to a transaction.

One common situation in which terms and conditions arise are a supplier’s “terms of trade” or “trading terms”. These set out the terms and conditions on which a supplier of goods or services provides those goods or services to its customers.

Some people consider that terms and conditions are not necessary for their business, however, you might be surprised at the rights that properly drafted terms and conditions can give you that you do not otherwise have at law.

For example, if a customer owes a supplier money, and the supplier engages debt collectors to help recover that money, the supplier cannot recover its debt collection costs from the debtor, unless there is a clause in the supplier’s terms and conditions that specifically allows the supplier to do so.

Similarly, the supplier cannot claim interest on a debt unless its terms and conditions specifically state that interest will accrue on unpaid invoices (of if the supplier commences legal proceedings, and the Court orders the debtor to pay interest).

What can be included in terms and conditions?

As well as clauses relating to the recovery of debt collection costs and interest from debtors, depending on the nature of your business, you might also wish to include terms relating to:

  • When risk transfers to the buyer: for example, if you are in the business of selling and delivering goods to your customers, and the goods are damaged in transit by the transport company, you might be liable for the cost of replacing those goods, unless you have a specific clause in your terms and conditions that says that the risk in the goods transfers to the customer when the goods are collected from your warehouse.
  • Security: if you are providing goods or services on credit, there is a not insignificant risk that your customer will not pay you. In most cases, if this happens, your only option is to commence legal proceedings in a Court, and such legal proceedings can be time-consuming and expensive. However, with properly drafted terms and conditions, you can take steps to recover the debt by registering a security interest against your customers’ personal property or registering a caveat over any real property owned by your customer.
  • Limitation or exclusion of liability: you may want to include a clause in your terms and conditions that limits (or entirely excludes) your liability in the event that you provide goods or services that cause your customer to suffer a loss.
  • Jurisdiction: if you are supplying goods or services outside of Western Australia, and an issue arises, your customer could potentially sue you in their own state or country, requiring you to submit to an unfamiliar jurisdiction, and travel to another state or country to attend Court appearances. To avoid this, you can set out in your terms and conditions that the contract is subject to the jurisdiction of Western Australia.

How Douglas Cheveralls Lawyers can assist

Properly drafted terms and conditions can help you protect your legal position and interests, and save you a lot of money in the long run.

Douglas Cheveralls Lawyers have extensive experience in preparing different terms and conditions to suit individual businesses and their specific requirements. We have worked with a wide range of clients to prepare terms and conditions for their specific needs, including:

  • Heavy plant and equipment hire businesses;
  • Various businesses in the building industry;
  • Transport businesses;
  • Logistics and warehousing businesses and storage facilities;
  • Recreation centres;
  • Industrial painting and coating businesses;
  • Recreational equipment hire businesses; and
  • Charities.