Proact Series: Online Terms of Trade

By Andrew Comer Stace Hammond andrewc@shlaw.co.nz

Once you’ve decided to trade online, you should ensure you’ve got an appropriate set of ‘terms of trade’ in place. Ideally these should be easily accessible, at all times, to anyone visiting and using your website.
Terms of trade are the basis on which suppliers and customers agree to do business. They set out each party’s expectations, rights and obligations regarding the supply of goods or services.
For suppliers, they are a risk management tool. They allow suppliers to limit exposure to liability. For customers, they provide clarity and certainty around the trading process.
Important note: Terms of trade contain the ‘general’ or ‘standard’ terms and conditions of an agreement between supplier and customer. The ‘specific’ terms and conditions of an agreement – for example, the parties’ names, description of specific goods or services supplied and price payable – will usually be contained in a separate document, such as an invoice, a purchase order or application form.

To watch our video on this topic, click here.


This article sets out some of the key things you should think about when putting together your online terms of trade:


FUNDAMENTAL MATTERS:

Ideally, terms of trade should include, as a bare minimum:

o Ordering: how does the customer go about ordering the goods or services, if not through the website?

o Price: when and how must payment be made? Is there a discount for early payment? Is there a penalty for late payment?

o Liability: is the parties’ liability under the contract limited and, if yes, how is it limited?

o Disputes: how are disputes resolved?

o Termination: who can terminate and on what basis?

o Website: Are there any conditions in using the website, even if you don’t place an order? It’s also worth thinking about whether the customer can purchase through an ‘app’ or social media, in which case the term ‘online system’ or similar should be used instead of the term ‘website’.

SUPPLIERS OF GOODS – ADDITIONAL CONSIDERATIONS:

Suppliers of goods have additional considerations to think about, including:

o Delivery: how, where and when are the goods to be delivered and who is responsible for delivery costs?

o Risk / Title: when does risk in, and title to, the goods pass to the customer? This will have implications for the parties’ insurance arrangements.

o Security: what kind of security (if any) is the supplier taking to secure payment for the goods? A supplier will likely want to take a ‘security interest’ over goods supplied and the proceeds of their sale (and, in some cases, over the customer’s personal property). The supplier should register a financing statement(s) on the Personal Property Securities Register to ‘perfect’ that ‘security interest’.

o Returns / Refunds: what are the business’s policies regarding returns or refunds for damaged or incorrect goods?

NOTICE AND ACCEPTANCE:

To be enforceable, your customer must be aware of your terms of trade and the customer must also agree to or ‘accept’ them. These concepts are discussed in-depth in a separate ProAct article covering the basics of contract law, something that’s often overlooked but essential that every business understands.

• Force majeure / COVID-19: Suppliers should consider whether their terms should specifically excuse performance because of unforeseen events (e.g. strikes, natural disasters etc) or because of foreseeable events (e.g. COVID-19 or a similar type of outbreak arising), and how liability is apportioned in those circumstances.

• Consumer protection and privacy laws: Some legislation, like the Fair Trading Act, needs to be followed whether supplying to business or individuals. If supplying to individuals (as opposed to businesses), suppliers should also be particularly mindful of their obligations under the Consumer Guarantees Act and the Privacy Act (among many other laws!). These laws are discussed in-depth in a separate ProAct article, but to summarise:

o Fair Trading Act: the Fair Trading Act protects purchasers against being ‘misled’ or being ‘treated unfairly’ – it prohibits businesses from misleading or deceptive conduct, making false representations, using unfair contract terms and employing unfair practices. This Act covers claims about products and services before they are purchased.

o Consumer Guarantees Act: the Consumer Guarantees Act implies a series of statutory guarantees for goods or services ordinarily purchased for personal, domestic or household use – among other things, they include guarantees of acceptable quality, fitness for purpose, reasonableness of price etc. This Act covers claims about products and services after they are purchased.

o Privacy Act: if a business collects ‘personal information’ (i.e. information about an identifiable, living person) in the course of its business, it must abide by the requirements under the Privacy Act in relation to the collection, use, disclosure, storage and access to such information.

This is a just a snapshot of some of the general issues associated with online terms of trade.

If you need help or guidance with your terms of trade, please contact us.

The above overview has been provided for general information purposes only. It is not, nor is it intended to be treated as, legal advice and is subject to change without notice.

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