EDITORIAL | LEGAL
GIVE YOUR SALES AGREEMENT A HEALTH CHECK
BRYAN PICKARD
Greenhalgh Pickard Solicitors and Accountants
Too often businesses rely on documents that they have been using for years without much thought about whether they will do the job if there is a dispute with a customer. Sometimes, these documents have been found on the Internet and used regardless of copyright or if they are any good.
If you haven’ t reviewed these documents in the last two years, it’ s time to give them a health check. Quotes, invoices, contracts and credit agreements are documents that can contain terms of sale, so you need to take the time to check them and update if necessary.
Will your terms be the agreed terms? It is no good having your own terms of sale if they don’ t form part of the contract between you and the customer. Firstly, your terms must be the agreed ones. This seems relatively simple when you supply a quote with the conditions attached. However, if the customer submits a confirmation in a purchase order with their conditions or some other modification of your terms in their response to your offer, then your conditions are replaced by their counter-offer. If you accept these terms, either expressly( by word or writing) or by performance( supplying the goods), you are bound by the terms of the customers offer. Secondly, if your terms are to be the agreed terms, they must be communicated to the buyer either before or at the time the contract is made.
To avoid this, your form of offer, be it a quote, invoice or contract, should:
a) Clearly state the method of acceptance and;
b) Clearly indicate the terms of sale and the customer acknowledges them. For example,‘ The customer acknowledges that they have read and agree to the terms of sale on the back of this quote’.
This needs to be clearly brought to the customer’ s attention at or before the time that the customer accepts the contract by signing and returning it. Terms introduced after the contract has been made do not form part of a contract unless the parties agree to a variation. Delivering an invoice with the terms of sale after the agreement has been made will mean those terms will not be incorporated into the contract, unless the customer has previously received the invoice in a prior transaction when it can be implied that the customer knew of the terms through past transactions.
Check the basics:
PARTIES
• Is your business entity properly described and, if relevant, is your business name included?
• If it is a company, does it include its ACN or ABN? For example,‘ Mega Trading Pty Ltd ABN 76 123 456 789 trading as Mega Sales’?
• Is the customer adequately identified, including a name of the person placing the order?
• Where an individual is representing a company, trust or partnership, is there a warranty by that person that they have the authority to contract for the entity and, better still, guarantee payment?
• Where you use words such as‘ supplier’ or‘ customer’ or other shorthand for the parties names, are these defined in the terms of sale? For example,‘ Mega Trading Pty Ltd ABN 76 123 456 789( the Supplier)‘ or‘ Red Coat Partners( the Customer)’.
• Are these terms consistent through other contract documents, such as a credit agreement?
• Do you have adequate contact details?
WHAT IS BEING PROVIDED?
• Do the terms refer to the goods and / or scope of work to be provided? Check your definitions and ensure they refer to the relevant part of the quote / invoice / contract that describes the work and / or goods.
• Is there a whole of contract term? This is a term that limits the addition of terms unless agreed in writing. It removes the risk of terms being implied by representation, trade or conduct.
• Is your quote an offer or only information for the customer? If not an offer that can be accepted, is this stated in the quote?
• Does your offer have a lapsing date? For example,‘ This quote will remain open for 30 days from the date of the quote after which date it will lapse’.
PRICES
• Are they stated or is there a clear method of calculation?
• Is there a rise and fall provision?
• Can the supplier vary the price before delivery?
22 Summer 2017