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Making Terms of Trade Work

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Every business that runs client credit accounts needs effective terms of trade. This means the following issues must be addressed:


A supplier can take security over goods sold on credit terms by registering a financing statement on the Personal Property Securities Register (“PPSR”). Unregistered securities (such as retention of title or Romalpa clauses) lose priority to PPSR securities.

Trade suppliers can register a Purchase Money Security Interest (“PMSI”) over specified goods, which may take priority over a bank’s general security registered on the PPSR over the purchaser’s present and future property.


Interest rates charged on default must be included, otherwise interest may only be collected after a court judgment and at statutory rates.


Similarly out of pocket costs for debt recovery (including legal fees) are not recoverable unless stated, meaning that low level statutory cost bands apply, after judgment is obtained.

Court Proceedings

Supply terms should state that proceedings may be issued in a court of the supplier’s choice, otherwise the default venue is the court closest to the purchaser.

Personal Guarantees

Default in paying suppliers can be the last event before company liquidation.  A PPSR security can help recover goods or trace funds, but personal guarantees are also a very effective way to get paid in full. However the legal standard for enforcement of guarantees is high, and correct procedures are essential.


Other matters that can be covered in terms of trade include authorisation for credit checks, allocation of risk, insurance, intellectual property rights, and Consumer Guarantees, Sale of Goods and Privacy legislation waivers where appropriate.

Preparation, Execution and Registration

Enforcement of supplier’s rights under terms of trade relies on clear legal drafting, evidence of agreement, correct execution by purchasers and guarantors, and valid registration of any PPSR securities. All of which may be achieved online with the right set-up.


Make sure your business’s terms of trade are really working for you.



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