Credit advice

Terms of trade or conditions of sale  that you should include protect your rights

Terms of Trade, also known as Conditions of Sale or Terms and Conditions, are designed to protect the seller's rights, to limit potential liabilities and provide some degree of security for the recovery of the debt, following the supply of goods or services.

Equally, the seller will have his/her own terms. What is essential is that both contracting parties (i.e. buyer and seller) agree Terms of Trade between them before, or at the time that a contract is made. This will set the ground rules between the contracting parties. It will mean that both parties know exactly what is expected of them and may prevent unnecessary disputes.

A good time to agree Terms is when the seller has had their credit facility letter formally accepted by the customer.

Areas which should be mentioned in a company's terms of trade include:
1.Definitions (e.g. "buyer", "seller") 2.Quality
3.Price 4.Quotations
5.Delivery/date/arrangements 6. Risk and property/retention of title
7.Terms of payment 8.Time limit for raising disputes
9.Right to interest and compensation for debt recovery costs 10.Loss or damage in transit
11.Acceptance of goods 12.Variations to contract
13.Patent rights/indemnity 14.Force majeure
15.Jurisdiction/applicable law 16. Assignment and subletting of contract
17.Right to progress and inspect goods 18. Warranties and liability
19.Severability 20.Insolvency and bankruptcy

The preparation of contractual Terms of Trade, in particular those which apply to specialised areas of trading, requires a significant degree of legal expertise. Unless such expertise is used there are real risks that a supplier and purchaser, when entering into a contract for the supply of goods or services will innocently fall into one of many pitfalls in this area.

While it may not be practical or cost-effective to take legal advice before supplying each customer, it is advisable that you should take the advice of a solicitor or in-house legal adviser when the terms of your 'Standard Conditions of Sale' are being drafted.