REDUCE risk by informing customers and clients of your terms of trade 12 Nov 2012

 REDUCE risk by informing customers and clients of your terms of trade. Make sure they are aware of them before they accept your contract.

Sure, you can usually trust those you have dealt with for years, but what about new business? Anyway, why not make your terms of trade clear to all? It saves any argument and it looks smart.
Listed below are several things you might consider. Once you’ve done that, get your lawyer to develop a proper contract.
We’re not trying to cover everything; just to start you thinking.
We get our clients to sign an engagement letter. It’s our version of our terms of trade.
Here’s a list of things to think about for inclusion in your contract:

  • What are you going to do if, part the way through the job, the customer wants to vary the agreement? It’s usual to sign a variation of agreement document when this happens. What should be included in it?
  • When are you going to be paid?
  • Do you require progress payments or a deposit?
  • What are your rules about retentions?
  • What if your customer is a company, a limited liability partnership or a trust? In these circumstances, can you get the guarantee of the directors or trustees? Consider the sesqui-centennial celebration in 1990 developed by Wellington City Council in a time of recession. The project was operated by a trust, not the council. It was a disaster. Many local tradesmen who did work on the project were never paid. By having the trust run the event, the council was not responsible for the debts.
  • Think about the options if a customer refuses to pay you a deposit. We can make suggestions
  • Try to avoid turning good business away.Include the following in your agreement:
  • Interest for late payment and debt collection  costs
  • Adjustment for materials price increases.  There are signs high inflation may return so  this could become a major issue.
  •  Put in a deadline for accepting your quote and  so create urgency
  • What if some other tradesman’s delay causes  your work to be late?
  • Your warranties and the extent to which they  will be limited.

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