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Terms of Trade

What are your Terms of Trade?

Terms of Trade are also known as your business’ terms and conditions. Often, they are attached as an annexure to a business’s invoice or set out on its website. Terms of Trade is really just a generic term for any contract which sets out the conditions attached to the sale of your goods and services.

What is included in Terms of Trade?

Given the terms and conditions can apply to any business, the provisions included are varied.

Almost all Terms of Trade will contain clauses relating to:

  • Payment terms
  • Limitation on Liability
  • Warranties
  • Boilerplate clauses including those which relate to jurisdiction, entire agreements, severability and the like.

More specialised Terms of Trade would include:

  • Intellectual property
  • Confidentiality
  • Product or service warranties
  • Privacy
  • Retention of title (i.e. clauses which mean the seller retains ownership of goods until they are paid for)
  • Rights to register goods on the Personal Property Securities Register; and
  • Rights to resell goods

Terms of Trade example

To give you an example of what comprehensive Terms of Trade would look like, consider this scenario.

A tech startup sells a high tech product, requiring software to operate it, training to teach the customer to use it and provisions for after sales support.

In this scenario a rather complex set of terms and conditions are required, but like all startups they want to keep it simple. Of course, when you consider these that Terms of Trade include the sales of goods, the provision of services and a software (and firmware) licence there really isn’t anything simple about the transaction.

In this scenario the following provisions are likely to be found in the business’ Terms of Trade:

Payment Terms – These set out the obligations to invoice and pay those invoices. Where the sale may be international the payment terms will need to include provisions for who is responsible for any import duties and provide for the payment of or exclusion of GST (or other value added tax).

Delivery, Title and Risk – Who is responsible for the delivery of the goods, when does ownership take place (when the payment is made?) and if the product is damaged in transport who wears the risk?

Software Licence –In this scenario the rights to the software would typically be limited to a specific purpose, which is the operation of the product. However, provisions relating to the protection of the intellectual property in the software (and firmware) will need to be addressed as a minimum. See intellectual property below.

Services – Provisions will need to cover off what is in and out of scope, whether or not there are any agreed service levels, what is the price of those services and where are the services performed (onsite or offsite).

Intellectual property – In this day and age a new product can hit the market one day, be packed straight into a shipping container and sent offshore where it is dismantled, reverse engineered, and a copy can be ready for market in a strikingly short period of time. For this reason, there needs to be very strict conditions on the use of the product, software and firmware. Those provisions should limit the purpose for which the product can be used, prohibit reverse engineering and protect the copyright in both the source and object code.

PPSR - The Personal Property Securities Register (PPSR) is a government register which allows individuals to record ownership on a public database and the associated laws (which at first appear counterintuitive) protect that ownership. That is if someone sells your product before they have paid you for it, you may be able to re-claim the product from the purchaser. Where the goods are leased, paid off over time or acquired in advance of payment, making provisions for the PPSR are good idea.

Confidentiality – Given we have a new product to market the confidentiality clause will need to take over where your Confidentiality Agreement or Non-disclosure Agreement left off.

Limitation of Liability – Every business wants to exclude all liability. However, in Australia certain consumer rights are guaranteed. In fact, it is unlawful to purport to exclude them in a consumer contract and the ACCC regularly penalise those who do. Certain liabilities can be excluded in certain circumstances. Simply EXCLUDING ALL LIABILITY IN CAPITAL LETTERS does not work in Australia.

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