Terms of trade clauses: what each one does for your business

A New Zealand terms of trade should cover how the job runs, how you get paid, the security you hold, how information is handled, and what happens when something goes wrong. Each clause earns its place when it fits the way your business actually quotes, books and delivers.

Strong terms of trade come down to clarity and coverage. Having token terms is not enough: they need to be up to date, legally strong and fit for purpose. Below is every clause we look for, in six sets, with what each one does for you in practice and the New Zealand law it has to work with. Where a clause has a page of its own, we point you to it.

Making it a contract

The parties, by their legal names

Your terms of trade are a legal document between two entities. Your brand or trading name is not enough on its own: the terms should name your business and your customer by their full legal names, so there is no doubt who owes whom. How to capture your customer’s details is in credit applications.

Definitions, in plain English

Definitions remove ambiguity, and that matters especially under fair trading law, where documents need to be read and clearly understood. When a contract is disputed, the words are read as an ordinary reader would understand them, headings included, and where a clause is genuinely unclear it can be read against the business that wrote it. A clause that takes three readings to follow is a clause your customer can argue about.

Acceptance, before the work starts

Terms only bind a customer who knew about them before the contract was made. Terms sent for the first time on an invoice, after the job was agreed, come too late. So your terms should say how a customer accepts them (a signature, a ticked box, a written go-ahead that refers to them), and you should be able to show it. More on this in terms of trade.

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The job itself

Variations

A variation is a change from the scope of work you quoted for. It can come from a client changing their mind, or from something on site you didn’t or couldn’t anticipate: access, ground conditions, a site that isn’t ready on the day. You can estimate a price, but until you dig the hole you don’t necessarily know what you will find. The variation clause sets the rules for how changes to scope, price or timing are agreed and charged once the work is underway, and it avoids “we never agreed to that.”

In practice, a lot of variations are agreed on site or over the phone. A verbal variation can still count in law; the hard part is proving it. So the clause should allow for that and say how the price is set when it isn’t known yet. The habit that makes it work is a quick email or text straight afterwards: “This is my understanding of the situation. Am I correct?” It saves a lot of pain, and it gives you a paper trail.

Delivery and risk

This clause says when goods, materials or services count as delivered, whether you deliver, they collect, or a carrier drops them on an empty site. Delivery usually triggers the transfer of risk, which matters for insurance. Under the Contract and Commercial Law Act 2017, risk generally travels with ownership unless you agree otherwise (section 148). If your terms keep ownership until you are paid, the risk can stay with you too, unless the delivery clause moves it to your customer from the moment of delivery.

Defects and warranties

The defects clause says how a problem is reported and put right, and within what time. Without one, your liability is open-ended. Give a specific period: “promptly” is not good enough. The right period depends on the work. A cleaner’s client is back in the space within a day or two; a builder gives a workmanship warranty measured in months. Where you supply parts, the warranty clause can pass on the manufacturer’s warranty and its conditions, which may not cover labour or travel. For homeowners, the guarantees in the Consumer Guarantees Act 1993 apply whatever your terms say, and residential building work carries a 12-month defect repair period under the Building Act 2004.

Cancellation

What happens if a client cancels after you have committed time, materials or labour? The cancellation clause protects those sunk costs: the costs you have already incurred, and the booked time you can’t fill at short notice. It should make sense for how you work. A business that books jobs a day or two out needs a different clause from one with a ten-week lead-in, and a client who tells you on day two of a three-day job that their own team will finish it has cancelled part of the work. The test we use is what is fair and reasonable in your industry.

It works both ways. The clause also covers you, within limits, when you have to cancel for reasons outside your control, and if you cancel, you refund the deposit. Courts can test a cancellation charge against the rule on penalties, and the Commerce Commission has had cancellation terms in a consumer contract declared unfair. A charge tied to your real costs and lost time is the one that holds.

Ask us about your clauses

Getting paid

Price and payment

Your pricing, deposits, progress payments, when you invoice and when payment is due. This is the backbone of cash flow, and without clarity here, everything downstream becomes negotiable. Choosing your due dates is covered in payment terms on invoices.

Can I charge interest on overdue invoices?

Yes, where your customer agreed to it in your terms before the work started. The clause needs to be one a customer can work out on the spot: a stated rate, and the point it starts to run. We once read a set of terms that charged interest at the seller’s overdraft rate plus 5%. No customer can know what your bank charges you on your overdraft, so nobody could ever calculate it. Charge interest, by all means. Make it a figure people can actually use.

If a debt goes to court, the court can award interest under the Interest on Money Claims Act 2016 even without a clause. Where your contract sets a rate, the contract rate applies instead. And if you charge a flat late payment fee rather than interest, that fee carries GST; default interest does not.

Can I pass on debt collection costs?

Debt collection is expensive, and if a customer won’t pay, it’s only fair that they wear the costs. Without a collection costs clause, you often end up paying out of your own pocket just to get your own money back. The clause works only if your customer accepted your terms before the debt arose, and courts have treated collection costs and interest as terms that need to be clearly brought to a customer’s attention.

A clause that recovers the costs you actually incur sits closest to your real loss. A fixed charge that bears no relation to cost can be tested as a penalty, under the Supreme Court’s 2020 test. For legal costs, a court can order your actual costs where your terms provide for them, and it still checks they were reasonable. The Disputes Tribunal does not award the costs of the hearing itself, apart from a few narrow cases.

One business owner told us about a customer who took them to the Disputes Tribunal to get money knocked off a repair bill. The business won, on the strength of its photos and notes, and was paid in full, nearly a year later. What it could not recover were its collection costs and interest. The customer had been handed a copy of the terms and had never signed and returned it. They won, and the cost of getting there stayed with them.

Used well, the clause also does its work before anything goes to an agency. A reminder that, under your terms, collection costs will be passed on if the account is not paid gives a customer a good reason to pay you first.

Pausing work when you haven’t been paid

Your terms can give you the right to pause work once an invoice is overdue. On a two-month project where the first month is still unpaid, that is your ability to say you are doing no more until the bill is paid. On construction work, the Construction Contracts Act 2002 gives a separate right to suspend, with its own steps: an unpaid payment claim, a written notice that says you will suspend under the Act, then five working days (section 24A). Leaving site without those steps is not using that right.

Your security

Three clauses decide what you can fall back on if a customer fails. The ownership clause keeps goods yours until you are paid, covered in retention of title. The security interest clause gives you consent to register on the PPSR over what you supply on credit, which is what allows you to act like a bank; see the PPSR explained. And a guarantee clause, where it is appropriate, has a director stand behind the company personally, covered in personal guarantees.

People and information

Privacy and credit checks

Where your customer is a person, such as a sole trader, a homeowner or a director, the privacy clause says how you collect, store and use their information, so you can run credit checks and recover debts without breaching privacy obligations. The law moved on 1 May 2026, and what that means for your forms is in credit applications.

Confidentiality

Usually a company-to-company matter: your pricing, your methods and your client data. You will keep things confidential because you are professional. The clause makes it an obligation on both sides.

Intellectual property

Who owns the designs, plans and documents you produce? Under the Copyright Act 1994, a customer who commissions and pays for plans or drawings owns the copyright unless you agree otherwise (section 21). The clause keeps them yours until you agree otherwise, which stops unpaid work being used. It can also carry your permission to use photos of the finished job in your marketing.

Health and safety

Site safety responsibilities, and how they apply when you are on their site or they are on yours. The clause does not replace your health and safety policy, and neither side can contract out of its duties under the Health and Safety at Work Act 2015.

See how we can help with your terms

When something goes wrong

Limitation of liability

This clause caps your exposure, so one job can’t become an existential threat. It needs to sit alongside your insurance: a public liability policy pays what you are legally liable to pay, so the clause and the policy have to be written with each other in mind. Two limits apply. For homeowners, the Consumer Guarantees Act remedies cannot be capped by your terms. And a blanket exclusion of all liability is the Commerce Commission’s own example of a term likely to be unfair.

Disputes

A dispute resolution clause gives both sides a set pathway before things escalate, and keeps issues commercial and procedural. A good one gives your customer a set number of days after the invoice to raise anything they are not happy with, so a complaint can’t be dragged out forever, then the steps to resolve it. It cannot shut out the Disputes Tribunal, which hears claims up to $60,000.

The Consumer Guarantees Act and Fair Trading Act

This clause acknowledges your obligations under both Acts and how they sit with your commercial terms. With a homeowner, neither Act can be written out of your terms. Between businesses, you can agree to contract out of parts of them, but only in writing, with both of you in trade, and where it is fair and reasonable (Fair Trading Act section 5D, Consumer Guarantees Act section 43). If you work for both homeowners and businesses, your terms need to tell the two apart.

Assignment and change of ownership

Can either side pass the agreement to somebody else? This one matters when a customer changes structure or ownership partway through a job, doesn’t tell you, and then wants the bill sent to the new owner after the work is done. The clause, alongside a requirement to tell you about a change of ownership or directors, keeps the debt with the business you contracted with.

Force majeure

Events nobody controls. Covid was the perfect example, and on a lot of sites the weather is the everyday one. Where an event makes a contract impossible to perform, the Contract and Commercial Law Act deals with money already paid and work already done, and a force majeure clause you agreed in advance is given effect (sections 61 and 67). So the clause decides what happens to your deposit and the work in progress.

Can a customer change your terms?

Once agreed, terms change by agreement. A customer who announces new payment terms, rebates or fees partway through a relationship is asking you to agree to them. You may feel you have to go along with it, and you can still reserve your position. Look at what you actually agreed to against what is being enforced now. The same applies to you: a clause that lets you change your own terms is more likely to be seen as fair if it gives notice and lets the customer walk away.

And when you sign the customer’s supplier agreement or subcontract, their agreement is usually the ruling document. We cover that in when the customer’s contract rules.

When we read your terms

The first thing we look for is whether the terms describe the business in front of us. Terms copied from another company, drafted years ago, or written before the business changed shape tend to fail in the same places. A cancellation clause written for long projects turns up in a business that books its jobs a day or two out. A pricing clause talks only about quotes when most of the work runs off a price list.

Then we look for the clauses nobody can act on: interest at somebody else’s overdraft rate, or a price dispute settled by “a certificate from the general manager”. Terms of trade are supposed to be easy to understand. If you can’t work a clause out on the spot, neither can your customer.

And the one we raise with almost every client: the liability clause and the insurance policy have usually never met. When there is a claim, insurers increasingly ask to see your terms of trade to understand what you agreed to. A client of ours faced a claim of about $40,000 over a boat engine, after a routine service job worth around a thousand dollars, brought by the customer’s own insurer. Take your liability clause to your broker, so the clause and the policy match the customers you have and the work you do.

What you can put in place now

• Read each clause against how you actually work. How you quote, book, deliver and invoice, and every kind of work you do: supply only, supply and install, maintenance, hire.
• Send your liability clause to your broker. Ask them to check it against your policy and the customers you work for.
• Make acceptance clear before the job starts. Every new customer, every time, with a record you can find again.
• Capture variations on the run. A text or email the same day, confirming what was agreed and what it costs.
• Use the clauses you have. If your terms provide for interest and collection costs, tell customers before an account goes to collection that those costs will be passed on.
• Revisit them when things change. Legislation changes, the business climate changes, and your business grows. Your terms should keep up.

No clause guarantees you get paid. Well-written terms, in play, put you in a far stronger position if it comes to it. This page is education and commercial insight from our own research and experience, not legal advice. Do your own research, and get legal advice for your own situation.