Terms

Late payments – is your business protected?

For many small and medium-sized businesses, the biggest threat to profitability (and sustainability) is not a lack of work, it is getting paid on time.

Cash flow problems caused by overdue accounts can affect the ability of a business to pay suppliers, meet payroll obligations, invest in growth and maintain profitability. If one business fails, that has consequences for other businesses, creating a domino of insolvencies and it is particularly catastrophic when owners or directors have personally guaranteed the debts of the business.

While good commercial relationships are important, businesses should also ensure they have the right legal protections in place before problems arise.

PREVENTION IS BETTER THAN RECOVERY

The easiest debt to recover is the one that was properly documented from the beginning.

Many businesses still rely on verbal agreements, email exchanges or informal quotes when supplying goods or services. Unfortunately, these arrangements can become difficult to enforce if a dispute arises.

Well drafted T&Cs should clearly address matters such as:

  • payment terms;
  • interest on overdue accounts;
  • retention of title;
  • limitation of liability;
  • dispute resolution procedures;
  • recovery of legal costs; and
  • termination rights on default.

Having these provisions in writing can significantly strengthen your legal position if payment is not made.

Many businesses have not reviewed their trading terms (if they even have them) for several years. Changes in legislation, court decisions and business practices mean that outdated contracts may no longer provide the level of protection they once did.

A regular legal review can identify gaps before they become expensive disputes.

IT PAYS TO ACT EARLY

One of the most common mistakes businesses make is waiting too long before taking action. Early intervention often results in quicker resolution and lower recovery costs.

The longer an account remains unpaid, the less likely it is to be recovered. Businesses should have clear internal credit control procedures, including:

  • issuing invoices promptly;
  • following up overdue accounts consistently;
  • sending formal letters of demand where appropriate; and
  • obtaining legal advice before debts become difficult to recover.

DIRECTOR DUTIES

For company directors, cash flow issues can create additional legal risks. Continuing to incur debts when a company is unable to pay its existing liabilities may expose directors to claims relating to insolvent trading under the Corporations Act 2001 (Cth) and breach of other director duties.

Directors experiencing financial pressure should seek professional legal and accounting advice as early as possible. Early restructuring or negotiated commercial solutions are almost always preferable to allowing financial difficulties to escalate.

STRONG CONTRACTS PROTECT MORE THAN CASHFLOW

Commercial contracts do much more than record the agreed price. Well-prepared agreements can reduce misunderstandings, allocate risk appropriately, establish clear dispute resolution processes and protect valuable business relationships.

Whether you are engaging contractors, supplying goods, providing professional services or entering long-term commercial arrangements, investing in professionally drafted agreements is often far less expensive than resolving disputes after they arise.

HOW WE CAN HELP

Every business is different, and contracts should reflect the specific risks of your industry.

The McKillop Legal team assists businesses with:

A proactive legal review today can help prevent costly disputes tomorrow.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

in Business / Commercial Law / Debt Recovery / Dispute Resolution / Litigation / Risk management  by 01 Sep 2026 0 comments

What is legal tender in Australia?

As you would expect, Australian banknotes are legal tender throughout Australia.

Similarly, a payment of coins is a legal tender in Australia however, there are restrictions, such as those in the Currency Act 1965, about how much can be paid in coins.

Coins are not legal tender if they exceed:
  • 20c where 1c and/or 2c coins are offered (these coins have been withdrawn from circulation, but are still legal tender);
  • $5 if any combination of 5c, 10c, 20c and/or 50c coins are offered; and
  • 10 times the face value of the coin if $1 or $2 coins are offered.

For example, if someone wants to pay a merchant with 5c coins, they can only pay up to $5 worth of 5c coins and any more than that will not be considered legal tender.

The above is of course subject to any agreement between parties – a provider of goods or services is at liberty to set the commercial terms upon which payment will take place before an agreement for the supply of the goods or services is entered into.

For example, vending machines may not accept small denomination coins or payment may be agreed to be made in foreign currency such as USD.

If you would like any more information in relation to any commercial law or contractual issue, please contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

Source: Reserve Bank of Australia 
in Business / Commercial Law / Dispute Resolution / General / Online Issues  by 07 Feb 2017 0 comments

The importance of proper Terms of Trade for your business

DOES YOUR BUSINESS EVEN HAVE ANY TERMS OF TRADE? IF SO, ARE THEY ADEQUATE (AND UP TO DATE)?

We all sell goods and services, but do we ever really stop and think about what it takes to have a valid contract? There are 4 essentials at law, namely:

  1.  Offer – what is being sold
  2. Consideration – the price
  3. Intention to legal consequences – this is presumed at law
  4. Acceptance – agreement to purchase

Even buying a bottle of water for $1 is entering into a contract. We know what is on offer, we know the cost, we know that once we pay the price, ownership changes hands and it is accepted by paying the price.

Certain things cannot be sold without a written and signed contract in a very specific format that contains certain prescribed documents and words – such as a contract for the sale of land. Most things however don’t need that sort of detailed documentation to form a legally effective and binding contract

Most T&Cs are terribly inadequate. Often they are just copied and pasted from other documents and not tailored, leaving businesses thinking they are adequately protected when they really are not.

Most businesses that have Terms of Trade have terribly inadequate ones and often, the terms don’t form part of the deal at all as they are notified too late – for example where they are printed on the back of a receipt after the deal is concluded. The Terms need to be agreed before the deal is done.

WHAT SHOULD BE IN YOUR TERMS OF TRADE?

Here is a some of the things that should at least be considered for Terms:

  • Parties names and details – Use proper names (a business name is not a legal entity). Who is the buyer/seller?
  • Quotes/estimates – Is it fixed price or based on hourly rates or quantities?
  • How is the offer accepted – Payment, signature, purchase order, ticking a box to acknowledge the terms and then clicking ‘submit’ for online businesses
  • Exclusivity – Is there any obligation not to deal with or sell to others?
  • Term – Is there a fixed term for the arrangement or is it ongoing?
  • Renewal – How can it be renewed and for what term?
  • Obligations – What other obligations (if any) do the parties have to each other?
  • Title – When does ownership to the goods actually pass?
  • Risk – Who is responsible for the goods whilst in transit?
  • Insurance – Who is to take it out? For what amount? To cover what risks?
  • Payment – How much? When is it due? How is it to be paid?
  • Interest – What is the consequence for paying late? What about liquidated damages?
  • Security – What security (if any) is provided to secure late/non-payment? Charge, Mortgage, PPSR Security Interest? Is a director to guarantee a company’s obligations?
  • Termination – On what basis? On what notice?
  • Notices – How are they given and what period of notice is required?
  • Obligations on termination – Return of goods, payment in full of all amounts due etc
  • Limitation of liability – To what extent is it limited? What liability can’t be excluded?
  • Releases and indemnities – What things may be covered by a release and what events is one party entirely responsible for?
  • Privacy – How is private information to be dealt with? Can you use their details to market other goods to them?
  • Warranties – What promises have been made about the product?
  • Entire agreement – is this agreement intended to cover the field regarding the parties’ dealings? Or are there numerous contracts that operate on other terms?
  • Force majeure – What happens if the parties can’t comply through no fault of their own, like a strike, accident or inclement weather?
  • Dispute resolution – What do the parties need to do to resolve a dispute? Mediate? Get an expert? Can they go to court without doing this?
  • Jurisdiction and governing law – which law applies and which court will hear any dispute? Really important for online trading!
  • Delegation – Can a party delegate their role to a third party? How? Do they need approval?
  • Assignment – Can a party assign the benefit of the contract to someone else?
  • Confidentiality – Are the terms of the deal to be kept secret? Are staff also to be restrained?
  • Intellectual property – Who owns the IP? How is it to be used/returned?

If you buy, hire, sell or on-sell goods or services, whether through a shopfront or on-line (or you have a client that does so), please consider whether they actually even have any Terms and Conditions of Trade or if they do, whether they are adequate.

If they do have T&Cs, it may be that they simply copied and pasted various parts from other documents and websites they had seen. This can often lead to them mistakenly thinking they are adequately protected when they actually are not.

They may need to be updated to reflect recent changes in the law such as the Australian Consumer Law and the Personal Property Securities Act (or if they refer to legislation that doesn’t even exist anymore! (Such as the old Corporations Law and the Trade Practices Act).

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to starting or buying a business, drafting business documents or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

in Business / Commercial Law / Dispute Resolution / General  by 21 Sep 2016 0 comments