In Short
Outdated trading terms can expose your business to legal risk and may be unenforceable.
You should update your terms when your business, laws or customer expectations change.
Modern trading terms must comply with Australian Consumer Law, including unfair contract term and consumer guarantee rules.
Tips for Businesses
Review your trading terms at least once a year and whenever you change products, pricing, delivery or markets. Check that your terms comply with unfair contract term laws and do not limit consumer guarantees. Make sure payment, liability, IP and dispute clauses reflect how your business actually operates today.
Summary
This guide explains when Australian business owners should update their trading terms and the legal risks of using outdated terms under Australian Consumer Law. It is prepared by LegalVision’s business lawyers, and LegalVision, a commercial law firm, specialises in advising clients on commercial contracts and compliance.
Trading terms are the contract that outlines how you do business. They provide an overview of the rights and obligations of you and your customers. Your trading terms should include details on the goods or services you provide, customer payment obligations, and how you manage risk, liability and potential disputes.
Your business faces risk if you use outdated trading terms. Knowing when to update these terms is important so that you can stay compliant and operate effectively. This article explains the signs that your trading terms need updating, the legal risks of non-compliance, key elements of modern terms, and the importance of professional review.
Signs Your Trading Terms Need Updating
You should regularly review your trading terms as a crucial business practice. If you experience recurring issues or your business has evolved, it is time for an update.
Update your trading terms when you:
- introduce new products or services;
- expand to sell overseas;
- change your payment processes or delivery methods; and
- modify your business operations in any significant way.
If you have not updated your terms for several years, they likely do not reflect current laws or your business operations. Terms that were compliant years ago may no longer be suitable.
Legal Risks of Outdated Terms
Using outdated terms exposes your business to risks:
- Unfair Contract Terms: A significant risk is non-compliance with the Unfair Contract Terms (UCT) regime under the Australian Consumer Law (ACL). This came into effect on 9 November 2023. The law considers a term unfair if it: causes a significant imbalance in rights, is not necessary to protect legitimate interests or would cause detriment if enforced. An example of a UCT is a term that allows only one party to unilaterally end the contract. A term deemed as a UCT may be unenforceable and void.
- Consumer Guarantees: If your business sells to consumers (rather than other businesses), outdated terms may contain clauses that attempt to limit consumer rights under the ACL. For example, a clause stating ‘no refunds or returns under any circumstances’ is illegal. It denies consumers their right to a remedy when a product is faulty. Such clauses are void. Relying on them can expose your business to legal action from consumers and the ACCC, which regularly audits Australian businesses for non-compliance.
- Unprotected Intellectual Property (IP): If your business has developed new branding, software, or other valuable IP, your old terms may not provide adequate protection. They might fail to specify ownership of IP created during service delivery. This leaves your proprietary information vulnerable to misuse or infringement.
Key Elements in Trading Terms
You should ensure your trading terms cover several key elements:
- Payment Terms: Your terms must specify the price of your goods or services, accepted payment methods, payment due dates and any interest applied to late payments.
- Parties’ Obligations: The terms should accurately describe the goods or services you provide. They must also outline the obligations of both your business and the customer, including delivery terms, who holds the risk for loss or damage during transit, and any warranties you provide.
- Intellectual Property and Confidentiality: Your terms should clearly state who owns any intellectual property created and should obligate both parties to keep confidential information private.
- Dispute Resolution: This outlines a clear process for handling disagreements between the parties. This typically involves requiring parties to attempt negotiation or mediation before resorting to costly court proceedings.
- Limitation of Liability: Your terms should clearly define the extent of your business’ liability if something goes wrong. This includes specifying any caps on liability amounts and excluding liability for certain types of loss (such as indirect or consequential losses). However, you must ensure these limitations comply with the UCT regime and cannot exclude liability that Australian law requires you to accept, such as liability for breaching consumer guarantees.
- Termination: This clause establishes how and when either party can end the contract, including required notice periods and consequences of termination, such as final payment of outstanding invoices and return of any materials.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
Key Takeaways
Successfully managing your business requires a proactive approach to your trading terms. Regularly review and update your terms to reflect changes in your business and the law. Ensure your contracts comply with the Unfair Contract Terms regime to avoid significant financial penalties. By investing in professionally drafted and reviewed trading terms, you can build trust with your customers and protect your business’ legal and financial interests.
LegalVision provides ongoing legal support for Australian businesses through our fixed-fee legal membership. Our experienced lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
You should review your trading terms at least annually, or whenever your business operations change.
If a court finds a term to be unfair, that term becomes void, meaning it is not enforceable. Your business can also face substantial financial penalties for each unfair term included, proposed, or relied upon in a standard form contract.
You should not copy trading terms from another business’ website. This might seem like an easy solution, but it creates serious risks for your business.
The terms you copy may not comply with current Australian laws. They might be written for a completely different business model than yours. The terms of another business could also be protected by copyright, which means copying them could lead to legal action against you.
Each business is unique. Your trading terms need to reflect your specific operations, risks, and customer relationships. Instead, invest in professionally drafted terms. This ensures they comply with the law and actually protect your business interests.
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