Terms of Trade NZ
That Get You Paid On Time

Most NZ businesses get terms of trade NZ wrong in one of two ways. They download a template that doesn't fit their industry, or they skip them entirely and trade on goodwill. Both create real exposure. This guide covers what enforceable terms must contain, the legislation that shapes them and the mistakes that quietly cost businesses money every month.

What makes Terms of Trade enforceable under NZ law?

For terms of trade NZ to bind a customer, they must be incorporated into the contract before or at the time the agreement is made. Terms presented after work has already started, buried in invoice fine print or added retrospectively may be unenforceable. The customer must have had a reasonable opportunity to read them.

Terms must also comply with the Fair Trading Act 1986 and, for consumer transactions, the Consumer Guarantees Act 1993. Both override what's written in your terms where they apply.

How do the Fair Trading Act and CGA interact?

The Fair Trading Act prohibits misleading and deceptive conduct in trade. Terms that misrepresent your product, service or rights, or contain unfair contract terms, can be challenged.

The Consumer Guarantees Act provides statutory guarantees to consumers that cannot be contracted out of. However, the CGA can be excluded for business-to-business transactions where both parties are in trade and the exclusion is expressed clearly in writing. Getting this distinction wrong, such as incorrectly applying a CGA exclusion in consumer-facing terms, can render the exclusion void.

Why does penalty interest get challenged?

You can charge penalty interest on overdue accounts, but only if it's set out in your terms of trade NZ document before the contract is entered into, and only if it represents a genuine pre-estimate of your loss from late payment. NZ courts will not enforce penalty clauses that are purely punitive rather than compensatory.

A standard rate of 1.5% to 2% per month, combined with a debt collection cost recovery provision, is generally defensible. Sky-high penalty rates designed to punish are routinely struck down.

What does PPSR registration actually do?

The Personal Property Securities Register, established under the Personal Property Securities Act 1999, is where businesses record their security interest in goods supplied but not yet paid for. Combined with retention of title in your Terms of Trade, PPSR registration protects your ownership if a customer defaults or becomes insolvent.

Without PPSR registration, your goods can be claimed by the customer's liquidator even if your terms say title hasn't passed. Margate Group can register your PPSR interest at the same time we draft your terms.

What happens when a customer doesn't pay?

If your Terms of Trade are properly drafted and incorporated, recovery follows a clear sequence. Reminders, formal demand letter, then if needed a statutory demand under the Companies Act 1993 or proceedings in the District Court. Each step puts pressure on the debtor and preserves your rights.

Margate Group supports the early stages of recovery, including drafting demand letters and providing escalation guidance. For court proceedings we refer clients to appropriate legal counsel since we are a NZ business consultancy, not a law firm.

How often should I update my Terms of Trade?

Review every two to three years, and immediately if you change what you sell, who you sell to or how you sell. Major legislative changes, such as the Contract and Commercial Law Act 2017 consolidation, can also trigger a review. Terms drafted ten years ago for a different business model rarely hold up to current scrutiny.