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If your business allows customers to pay for your goods and services after delivering or providing them, it is important to have your credit terms and conditions in order. An example situation is if you deliver goods and allow your customers to pay for them 7, 21 or 28 days after delivery. 

A credit terms and conditions outlines how and when you expect your customers to pay for your goods and services and any debt collection policies your business may have. It is an important document with both legal and financial ramifications. Your credit terms and conditions should set out:

  • that you will supply credit only on certain terms;
  • that the customer will pay when the payments become due;
  • what other costs will be associated with purchasing the goods, and when these payments will become due and payable;
  • the interest payable on unpaid amounts; and
  • what actions you can take if they do not make the payments and further action is required to seek payment for the goods.

Payment Terms

As part of the terms by which you provide credit, you should specify the payment methods available to the customer. These vary from business to business, but typically include:

  • cash;
  • cheque;
  • credit or debit cards (restrictions may apply to credit card fees you are allowed to charge a customer);
  • BPAY or online payments;
  • direct debit; and
  • buy-now-pay-later arrangements (e.g. Afterpay). 

If the customer is a company, you may also wish to require that the company’s director, principals, or partners enter into a deed of guarantee to pay the goods. This will mean that you can hold them liable for the payments should the company be unable to pay for the goods or services.

If the customer is an ongoing account that orders regularly from your business, you may also wish to set out that you are able to change the prices of your products and services as you see fit and that any invoices sent to them after the change is made will reflect that.

The Terms and Conditions should also include a clause that allows you to refuse to provide goods ordered by the customer, terminate the customer’s account or terminate your contract with the customer.

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Title and Delivery

If you are a supplier or wholesaler of goods, it is important to have a detailed retention of title clause. This will set out that the title of the goods will not pass to the customer until they have either received the goods or completed the payment.

This is important to include so that during the period in which payment has not yet been made, you can still retain title in the goods. This means you can reclaim them after they have been delivered if payment is not made. In some cases, you may also be providing the goods on credit, and therefore it is important to make clear that you retain ownership of the goods until all the payments have been made.

In this clause, you should reserve the right to keep or sell the goods until the payments have been completed. You should also set out that liability over the loss and damage to the goods will pass to the customer upon delivery of the goods.

Personal Properties Securities Act (PPSA)

If you provide goods on credit, you should also consider including a Personal Property Securities Act 2009 (Cth) clause. This clause sets out the customer’s requirement to provide you with any necessary information so that you can register your security interest in the goods you are selling on the Personal Property and Securities Register (PPSR). In doing so, you will increase your chances of recovering any outstanding payments for the goods if the customer is unable to, or refuses, to pay. 

General Clauses

Your credit terms and conditions should also include several general clauses to protect your business. These will allow for the proper administration of the terms. Such clauses may include:

  • privacy;
  • GST;
  • relationship of parties;
  • assignment;
  • severance;
  • waiver;
  • variation of rights;
  • force majeure;
  • notice;
  • jurisdiction; and
  • applicable laws.

Key Takeaways

It is important to draft a thorough credit terms and conditions to comply with the ACL and your obligations as a supplier or wholesaler. Your credit terms and conditions should set out how and when your customers are to pay you back for the goods or services you provide. Furthermore, they should detail any debt recovery policies your business has. Finally, if you are selling goods, it is important to register your interest in the goods on the Personal Property and Securities Register (PPSR) and include a retention of title clause in the credit terms and conditions.

If you require assistance with drafting your terms and conditions, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is the purpose of a credit terms and conditions document?

If you allow your customer to pay for your goods and services after you provide them, the Credit Terms and Conditions set out how and when the customer should pay you back. It will also detail what steps you will take if the customer does not pay you back on time. 

Should I have a credit application process before providing credit to my customers?

Yes. Provision of credit should be conditional on the customer ‘passing’ your credit application process. This can also be made a requirement in your credit terms and conditions.

When should I register my security interest on the Personal Property and Securities Register (PPSR)?

You should register your interest if you are selling, hiring or leasing goods.


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