Terms of Trade and Credit Application Template Australia: What to Include

Terms of trade are the standard rules a business sets for customers who buy on account: when each invoice is due, what happens if it is paid late, and who owns the goods until they are paid for. A credit application is the form a new customer signs to open that account and accept your terms.

Claim Done drafts your Terms and Conditions of Trade and a Credit Account Application from your answers for a flat A$49, ready to hand to your business customers. This guide covers what the two documents usually contain, the unfair contract terms rules, registering retention of title on the PPSR, and the privacy side of collecting customer details.

Who needs terms of trade and a credit application

If you supply goods or services to other businesses and let them pay later, you are giving credit. According to business.gov.au, without clear terms, customers may pay late, dispute the payment or refuse to pay. It suggests running credit checks, setting credit limits, and making it clear that customers do not own the goods until they have paid in full.

These documents are for business customers, including sole traders buying for their business. The Claim Done terms are not written for selling to households on credit.

What terms of trade usually cover

Payment terms form part of your sales contract. business.gov.au says they should tell customers which payment methods you accept, when you expect payment, whether you offer credit and on what conditions, and how you collect overdue payments. Trade terms usually cover:

• Orders, prices and credit limit: when an order is accepted, which price applies, GST, and how much credit the customer has.
• Payment terms: when each invoice is due and how to pay.
• Late payment: interest on overdue amounts (if you charge it), pausing supply while an invoice is overdue, and recovery costs.
• Invoice disputes: how a customer raises a query, and paying the part that is not in dispute.
• Retention of title: the goods stay yours until paid for, with the customer’s agreement that you may register this on the PPSR.
• Closing the account and changing the terms: how either side ends the account, and how much notice you give before new terms apply.
• Personal guarantees: some suppliers ask a director to personally guarantee the account. The Claim Done terms do not include one.

The unfair contract terms rules for small business customers

Trade terms you hand to every customer on a take-it-or-leave-it basis fit the ACCC description of a standard form contract. The ACCC explains that laws protect small businesses from unfair terms in standard form contracts. A contract is presumed to be standard form, and the business that prepared it has to prove it is not.

For new or varied standard form contracts from 9 November 2023, a small business is covered if it has fewer than 100 employees or less than $10 million in annual turnover. The ACCC says that if in doubt, it may be safest to assume your customers are covered.

A term is unfair if it causes a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interests of the party it favours, and would cause financial or other harm to the other party if enforced. The ACCC’s examples of terms that may be unfair include terms that let only one party:

• avoid or limit its responsibilities under the contract
• end the contract
• penalise the other for breaching or ending the contract
• change the terms of the contract.

Only courts make final decisions on whether a term is unfair, and they consider whether it is in plain language, clear and not hidden. An unfair term is void; the rest of the contract can continue without it.

Since 9 November 2023, proposing, using or relying on unfair terms in standard form contracts is banned and penalties apply. The ACCC notes that only a court can decide the penalty in a court case. So one-sided clauses copied from an old template are a risk, not a protection. The ACCC gives an example where a right to change prices was balanced by the customer’s right to end the contract without penalty. The Claim Done terms follow that approach: changes need 30 days’ written notice, and a customer that does not accept a change can close its account without a fee.

Retention of title and the PPSR

A retention of title clause says the goods remain yours until the customer pays for them. The PPSR explains that this generally creates a security interest in the goods where you have a written agreement to supply them, the customer pays later, and the goods do not belong to the customer until paid for. If you do not register it, the PPSR says you will be an unsecured creditor, with much less chance of getting your money or goods back if the customer cannot pay and goes out of business.

These interests are purchase money security interests (PMSIs), which have higher priority than other security interests over the same property. A single registration can cover repeated supplies to the same customer, though serial-numbered goods may need extra registrations.

Timing is strict. The PPSR timing rules say a registration against a company should be made within 20 working days after it signs the security agreement (or more than 6 months before it starts insolvency). For PMSI super-priority, goods that become the customer’s inventory must be registered before the customer gets them, and other goods within 15 working days of the customer getting them. The PPSR registers companies by their organisation identifier and sole traders by their individual name and date of birth, and wrong grantor details can make a registration ineffective.

Privacy when you collect credit information

A credit application collects personal details of owners, directors and contacts. The OAIC says most small businesses, meaning those with annual turnover of $3 million or less, are not covered by the Privacy Act, but some are, whatever their turnover. A covered business must follow the Australian Privacy Principles. Part IIIA of the Act separately regulates individuals’ consumer credit information, including credit reports.

Trade credit is commercial credit. The OAIC explains that the Australian Privacy Principles cover commercial credit information where the business must follow them, and that a credit provider may use it to assess an application or collect overdue payments. Under the Australian Privacy Principles, APP 5 deals with telling people about collection and APP 11 requires reasonable steps to protect what you hold. The Claim Done documents state that the information is used only to assess the application, manage the account, recover amounts owing and contact trade references. They do not include a consent to obtain credit reports.

What the two documents look like

Terms and Conditions of Trade

1. Application, and how the terms are accepted
2. Definitions
3. Orders and prices, with GST as you choose
4. Credit limit
5. Payment: 7, 14 or 30 days, or end of the following month
6. Invoice queries
7. Overdue amounts: interest (if any), pausing supply after written notice, recovery costs (if chosen)
8. Delivery and risk, retention of title, and PPSA and PPSR (goods only)
9. Australian Consumer Law statement
10. Closing an account, changes to the terms, notices, privacy, general

Credit Account Application

• Applicant: legal name, trading name, ABN, ACN, structure, addresses
• Owners, directors or partners
• Accounts contact and credit requested
• Trade references (if you want them)
• Declaration, signing table and a box for your office use

Using them, and when a customer pays late

Have each new customer complete and sign the application before the first supply on credit, and keep the signed copy. If you supply goods, register on the PPSR within the time limits above. When an invoice runs late, business.gov.au suggests starting with a polite reminder, then a letter of demand or a debt collecting service if payment still does not come.

Mistakes to avoid

• Supplying on credit before the customer has signed.
• Copying one-sided clauses from another business’s terms.
• Relying on retention of title without a PPSR registration.
• Registering a sole trader as if it were a company, or the reverse.
• Trying to take away consumer rights. The ACCC says contract terms cannot take away certain consumer rights.

To put your terms in place, start your Terms of Trade and Credit Application. You answer plain questions about your business and payment terms, and both documents are ready to download.