Advising On Terms Of Trade

What Good Terms Cover

Terms of trade set out the ground rules between a client and their customers. At a minimum they should address payment terms and due dates, what happens on late payment, ownership of goods until paid, dispute handling, and the parties' responsibilities. Together these turn each sale from a loose understanding into a defined agreement.

Many small businesses operate with no written terms at all, relying on goodwill until something breaks. Helping a client adopt clear terms is one of the most cost-effective risk measures available — it changes nothing in good times and protects them enormously in bad ones.

Find The Weak Points

When reviewing existing terms, look for the common gaps. Are payment terms and consequences for late payment clearly stated? Is there a retention-of-title clause keeping ownership of goods until they are paid for? Is there provision to recover collection costs or interest? Missing any of these weakens the client's position when a customer defaults.

Also check whether the terms match how the business actually operates. Terms that contradict the client's real practice, or that were copied from an unrelated business, can be worse than none. The aim is terms that fit the client's trade and that they consistently apply.

Make Sure They Actually Apply

Terms only bind a customer if they were properly brought to that customer's attention before the deal. Terms hidden on the back of an invoice issued after the sale may not form part of the contract at all. They should be presented at the point of agreement — on the quote, the order form, or a signed credit application.

Encourage clients to get terms accepted up front, ideally with a signature or a clear acknowledgement, and to keep that record. Properly incorporated terms are the difference between a clause that protects the client and one that turns out to be unenforceable exactly when it is needed.

Terms And Recovery Go Together

Well-drafted terms make recovery dramatically easier. Clear due dates, an interest entitlement, a costs clause and documented acceptance all strengthen a demand and reduce the room for argument. When a debt does need pursuing, the terms are the foundation everything else is built on.

This is general guidance rather than legal advice, and terms should be reviewed by a suitably qualified professional. If a client's terms are sound and a customer still will not pay, that strong footing makes a later debt referral far more effective than weak or absent terms ever could.