Terms of Trade
A Terms of Trade Agreement regulates an ongoing relationship between a Supplier and Customer.
4.7 (29 reviews)
Last updated December 18, 2024
Under 10 minutes
Suitable for Australia
Written by
Edwin Montoya Zorrilla
Reviewed by
Damin Murdock
Document Overview
A Terms of Trade is a document that regulates the terms of an ongoing trade relationship between a supplier and customer. The circumstances surrounding trade transactions can be complex and there are several risks involved with the supply of goods. For this reason, it is common to set out the general terms by which business will be conducted before finalising particular transactions. This is particular important in a context where transactions, and their variations, may be agreed on verbally, or with little paperwork.
The terms in this document are designed to help protect your interests as a supplier or customer engaging in trade. When businesses enter into trade relationships without appropriate legal protection, they leave themselves open to liability down the track.
What are terms of trade?
To begin, terms of trade are the rights and obligations set out in a business agreement for an ongoing trade relationship. Consequently, they are legally binding and are usually recorded in writing, providing for an effective mechanism to guard against risks.
The following kinds of agreements can be structured through terms of trade such as this one:
- Distribution agreements.
- Purchase agreements.
- Lastly, Supply agreements.
How do they work?
Terms of trade agreements are legally binding contracts that are stated to apply to all subsequent transactions between the parties. Therefore they help to provide transparency and minimise the chances of conflict. Moreover, they are the conditions that will govern the relationship and act as a reference point if conflict should arise.
Who uses them?
Terms of trade agreements are usually made with businesses who categorise themselves as suppliers, suppliers of raw materials, finished goods or service providers. That is to say, they often initiate a relationship with a proposal or quote. This process usually involves the business explaining the work that they will complete and the associated costs.
Legislative context
Agreements that set out standard terms and conditions in a business relationship are regulated by statutes such as the Sales of Goods Act 1923 in NSW. This Act ensures that terms of trade for the supply of goods or services (contracts of sale) are valid in accordance with the rules that dictate when goods pass between parties. Moreover, the Act provides rules for performance under these kinds of agreements.
The Legal Risk Score of a Terms of Trade Template
Our legal team have marked this document as low risk considering:
- There is a risk related to payment obligations, as the document allows the supplier to demand immediate payment for overdue amounts and apply high interest rates, which could financially strain the customer if payments are delayed.
- The document permits the supplier to amend quotes and charges unilaterally, which could lead to unexpected costs for the customer if the scope of the goods or services changes after an order is placed.
- The title and risk provisions transfer the risk to the customer upon delivery but retain title to the goods with the supplier until full payment is made, potentially complicating ownership and liability if disputes arise over payment or the condition of goods upon delivery.
Terms of Trade Checklist
Complete your free Terms of Trade with our checklist
Ensure Proper Signing and Witnessing
Make sure that the document is signed by the authorized representatives of both parties and witnessed appropriately as indicated at the end of the document.
Verify Agreement Details
Review the completed document to ensure all terms, such as payment terms, delivery dates, and service specifics, are correct and agreed upon in writing.
Notification of Changes
Communicate any amendments or updates to the terms promptly and ensure they are documented in writing and signed by both parties to maintain clarity and legal validity.
Record Keeping
Keep a copy of the signed document securely for both parties' records, and ensure easy access for future reference or in case of disputes.
Use this Terms of Trade if:
- You are a supplier of goods
- You wish to enter into an agreement with a customer that sets out the terms of your relationship
- You want to protect your business from potential liabilities and loss
What does this Terms of Trade cover?
- Quotes
- Orders
- Variations
- Invoicing and payment
- Additional charges
- Acceptance of goods
- Risk
- IP rights
- Agency and assignment
- Defaults and Termination
- Exclusions and limitation of liability
- Indemnity
- Force majeure - unexpected, uncontrollable acts
- Dispute resolution
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