Are your terms of trade fit for purpose?

Many businesses keep using the same terms of trade year after year without making sure that they have kept up to date with changes in the law, the way the business operates or with best practices. While they may have been fantastic when they were drafted, but a failure to keep them updated and current could prove to be an expensive mistake.  Even worse, some terms have been ‘pulled from the internet’ or generated using AI without any review to make sure that they are actually usual or applicable under New Zealand law.

From our experience, without a thorough review, most flaws are discovered in a dispute situation and when you most need them to be fit for purpose, and they can end up working against you rather than for you. 

Some examples are (among many other issues that may be relevant):

• Using words or phrases that come from America or somewhere else that have no legal relevance in New Zealand (or did have legal relevance but in maritime law and in the 1800’s); 

• If your terms are not usually negotiable, the unfair contract guidelines under the Fair Trading Act 1986 (FTA) have now been extended and apply to small business contracts, so you should check all of your terms are compliant.

• Do you have well drafted security provisions and processes if you provide goods on credit?

• Do your terms have the same delivery, payment or other terms as your actual practice – if not, some of your contract provisions may be unenforceable.

• Do you have consumers as customers? The Consumer Guarantees Act 1993 (CGA) will apply and indicating it does not additionally breaches the FTA;

• Have you excluded all warranties, terms or conditions that are not appropriate for your business (or for your customer type) as many are automatically implied in contracts if not excluded (i.e. under the Contract and Commercial Law Act 2017 and the CGA)?

• Are your personal guarantee terms worded well and are you getting these signed correctly so the guarantees are, and remain, enforceable?

• Have you checked what Privacy Act 2020 requirements you may have (these have again changed this year)? Do you have a Privacy Officer and do your terms properly refer to and fulfil all legal requirements around personal information and privacy?

• Product recalls are often overlooked or poorly thought out in relation to internal processes and insurance cover.

• Are you properly agreeing to use reasonable endeavours and not best endeavours? (See our article on this here: https://haighlyon.co.nz/reasonable-vs-best-legal-perspective);
  Have you limited your liability for loss and provided for matters beyond your control and have you done so in a way that does not invalidate your insurance?

• Do your contracts actually refer to current laws, and not laws that have been repealed like the Sale of Goods Act 1908 which was replaced a number of years ago.

• Do you charge a reasonable default interest fee for late payment and have effective enforcement clauses, so you can recover all of your reasonable enforcement costs in pursuing debtors?

If your terms don’t address the above issues or you are unsure whether your terms meet your requirements, then it is time to do a thorough legal and commercial review of your terms. We can assist you to make sure your terms work for you and minimise your risks. Contact Anthony Kuran on 09 306 0611 or @email or Andrew Knight on 09 985 2531 or @email