Terms Of Trade Explained: Guidance For Australian SMEs

Clear terms of trade are the backbone of smooth business relationships. Whether you’re a new sole trader or a growing company, having your trading terms set out in writing helps prevent misunderstandings, protects your cash flow, and sets expectations with customers and suppliers from day one.

If you’re wondering what to include, how Australian laws affect your terms, or where to start, you’re in the right place. In this guide, we explain what terms of trade are, why they matter for SMEs, what to put in them, and a practical step-by-step process to get your documents drafted, agreed and working in your business.

What Are Terms Of Trade?

Terms of trade (also called trading terms, terms and conditions, or terms of sale) are the contract conditions you apply when you supply goods or services. They set out the rules of your commercial relationship – pricing, payment timing, delivery, warranties, what happens if something goes wrong, and more.

Your terms might sit in a standalone document, be attached to a quote or proposal, appear in an online checkout, or be printed on your invoices. What matters is that customers have a fair chance to review and accept them before the deal is done.

For many SMEs, standardised terms of trade form the basis of every sale. If you tailor them for larger engagements or specific projects, that’s fine – but keeping a robust standard set ready to go saves time and reduces risk on every transaction.

Why Do Terms Of Trade Matter For Small Businesses?

Good trading terms do three powerful things for your business.

• They create clarity. Everyone understands the deal – price, inclusions, timing, delivery method, and the process if plans change.
• They manage risk. Clear provisions around liability, refunds and warranties, and timeframes for payment reduce disputes and support cash flow.
• They support compliance. Well-drafted terms help you align with Australian Consumer Law, privacy obligations and industry standards.

Without written terms, you’re relying on emails, verbal promises or assumptions. That increases the chance of disputes, makes debt recovery harder, and can leave you exposed on things like returns, scope creep or late payments. Having a clear, enforceable contract puts you on solid ground if issues arise.

What Should You Include In Your Terms Of Trade?

Every business is different, but most Australian SMEs will cover the following areas. Keep the language plain, and tailor the detail to your offering and risk profile.

1) Scope Of Supply

Describe exactly what you’re supplying – the product or service, key specifications, deliverables, inclusions and any exclusions. If scope changes are common, add a simple change process and set out how you’ll quote and approve variations.

2) Price, Invoicing And Payment

Set the price structure (fixed fee, hourly, unit price), when you’ll invoice, and when payment falls due. If you charge deposits or progress payments, state the amounts and triggers. If you intend to charge late fees or interest, make the basis clear and ensure it aligns with Australian law – see this guide to late payment fees.

Note: how you handle GST and other taxes is a financial decision. Make sure your invoice wording matches your tax settings and seek independent tax advice if you’re unsure.

3) Delivery, Timeframes And Dependencies

Explain how and when you’ll deliver the goods or services, what you need from the customer to do your job, and what happens if delays occur outside your control. For physical goods, include shipping terms and who pays freight.

4) Risk And Title (For Goods)

Clarify when risk passes to the customer (for example, on delivery) and when ownership transfers (title). If you supply on credit, consider retention of title wording and registering your interest on the PPSR – here’s why the PPSR matters for SMEs extending credit or providing consigned stock.

5) Returns, Repairs And Refunds

Set out your returns process, repair or replacement options, and when refunds apply. Your policy must sit alongside customers’ rights under the Australian Consumer Law (you can’t exclude those rights), so be careful to draft this section consistently with the ACL.

6) Warranties And Australian Consumer Law

If you offer a voluntary warranty, describe what it covers and for how long. Include the mandatory wording for consumer guarantees where required, and avoid statements that could be misleading. More broadly, ensure your advertising and representations don’t cross into misleading or deceptive conduct.

7) Limiting Your Liability

Limitations and exclusions of liability can be appropriate, but they must comply with the ACL and be reasonable. In some cases, you can limit your obligation to re-supply the services or pay the cost of re-supply. Drafting this well is important – see the overview on limitation of liability clauses.

8) Intellectual Property

Confirm who owns IP in deliverables, brand assets or content, and what licence the customer receives (if any). If you’re granting limited use, specify what’s allowed and what isn’t to avoid future disputes.

9) Privacy And Data

Explain how you handle personal information, and refer to your Privacy Policy if appropriate. The Privacy Act 1988 (Cth) generally applies to “APP entities” (including most businesses with annual turnover over $3 million and some smaller businesses in specific categories). Many smaller SMEs under $3 million are not directly regulated unless an exception applies. Regardless, customers expect transparency, so most online businesses adopt a clear, accessible Privacy Policy.

10) Dispute Resolution

Include a simple pathway for resolving issues (for example, good faith discussions then mediation) before starting court proceedings. This can save time and costs if things go off track.

11) Suspension, Termination And Consequences

Reserve the right to suspend services for non-payment, and explain when either party can end the agreement (for breach or convenience) and what happens next – final invoices, return of materials, and confidentiality continuing after termination.

What Australian Laws Do Your Trading Terms Need To Address?

Your terms are only useful if they’re enforceable and compliant. Here are the key legal touchpoints for Australian SMEs.

Australian Consumer Law (ACL)

The ACL sets mandatory consumer guarantees and prohibits unfair practices. Your terms can’t exclude consumer guarantees, and statements about performance, quality or timing must be accurate. Avoid “no refunds” or blanket exclusions that conflict with statutory rights. Keep your marketing and sales practices away from misleading conduct, and align your refunds/repairs wording with what the law requires.

Unfair Contract Terms

If you use standard-form contracts with consumers or small businesses, you must avoid unfair terms that create a significant imbalance, aren’t reasonably necessary to protect your legitimate interests, and would cause detriment. Penalties for unfair contract terms are now substantial. A focused UCT review and redraft is a smart investment if you rely on standard terms.

Privacy And Data

As noted, the Privacy Act applies to APP entities (often businesses with turnover greater than $3 million, and certain smaller operators such as health providers or those trading in personal information). Even if the Act doesn’t apply to you, publishing a transparent Privacy Policy and handling data responsibly builds trust and reduces risk.

Payments, Interest And Fees

Your right to charge interest or late fees depends on what your contract says and whether the charges are reasonable and properly disclosed. If you plan to apply late fees, make sure your approach aligns with guidance around late fees in Australia and is clearly communicated before the sale.

Security Interests And PPSR

If you sell goods on credit, rent equipment, or want to secure debts, consider using retention of title clauses and registering a security interest on the Personal Property Securities Register. Proper PPSR use can elevate you from unsecured to secured creditor status – see the business case for PPSR.

Limitation Of Liability And Risk Allocation

Limitation and exclusion clauses must be drafted carefully to be enforceable and ACL-compliant. Tailor the risk allocation to your supply model, and avoid catch-all disclaimers that may be struck out. A quick refresher on limitation of liability can help frame your approach.

Step-By-Step: How To Put Strong Terms Of Trade In Place

Here’s a practical way to get from “blank page” to confident, working terms.

Step 1: Map Your Sales Process

Write down how a typical sale happens in your business – from enquiry to quote, sign-off, delivery, invoicing and after-sales support. Note where problems have arisen in the past (late payments, scope creep, delivery delays) and highlight the rules you want in place to prevent them.

Step 2: Draft A Tailored First Cut

Use your process map to draft plain-English clauses covering scope, payments, timelines, risk, warranties and disputes. If you sell goods on credit, think about security and the PPSR. Keep it practical – the best terms mirror how you actually operate.

Step 3: Stress-Test For Compliance And Fairness

Read your draft through an ACL and UCT lens. Remove “no refunds” statements that conflict with consumer guarantees. Ensure any late fees or interest are clear and reasonable. Check that liability caps don’t purport to exclude core consumer rights.

Step 4: Get A Legal Review

An experienced commercial lawyer will tighten the wording, align your terms with the ACL and unfair contract terms regime, and make sure your risk allocation is enforceable. If you want a turnkey option, our Terms of Trade service packages drafting with practical advice on implementation.

Step 5: Implement With Clear Acceptance

Make your terms easy to see and accept. For in-person sales, attach them to quotes and confirm acceptance before you start work. For online sales, use a tick-box during checkout with a link to the full terms. For invoices, reference that all supplies are made under your trading terms and provide a link.

Step 6: Train Your Team And Embed The Process

Show your sales, operations and accounts teams when to send the terms, what to say, and how to handle common questions. Consistent use is the difference between “policy on paper” and real protection.

Step 7: Review Annually (Or When Things Change)

Revisit your terms when you add new products or services, change your pricing model, start selling into new states or overseas, or after a dispute reveals a gap. A yearly legal health check keeps your documents aligned with the law and your business model.

What Other Contracts And Policies Should SMEs Consider?

Terms of trade are a cornerstone, but most SMEs will need a few more documents to round out their risk management and compliance.

• Customer Agreement (or T&Cs): Your standard contract for services or product sales. This is the document we’ve been discussing – use a tailored Terms of Trade as your base.
• Privacy Policy: Explains how you handle personal information and supports your compliance posture and customer trust. Many businesses choose to publish a Privacy Policy even when not strictly required by the Privacy Act.
• Website Terms & Conditions: Set the rules for using your site or app, including acceptable use and IP notices.
• Supplier Agreement: Lock in pricing, quality standards, delivery terms and IP with key suppliers.
• Employment Contract (or Contractor Agreement): Clarify duties, pay, confidentiality and IP ownership with staff and contractors; a clear Employment Contract helps prevent HR disputes.
• NDA: Protects confidential information when you’re discussing partnerships, pitching or outsourcing.
• Shareholders Agreement: If you have co-founders or investors, a Shareholders Agreement sets out decision-making, vesting, exits and dispute processes.

Depending on your model, you might also look at personal guarantees for credit accounts, service level agreements for premium support, or statements of work for complex projects.

Key Takeaways

• Terms of trade are your standard contract for selling goods or services – they set expectations, protect cash flow and reduce disputes.
• Cover the essentials: scope, pricing and payment, delivery, risk and title (for goods), refunds and warranties, liability, IP, privacy, dispute resolution, and termination.
• Make sure your drafting aligns with Australian Consumer Law and the unfair contract terms regime, and be thoughtful about late fees, liability caps and security interests like the PPSR.
• Implement your terms so customers clearly accept them before work starts or goods ship – consistency is key to enforceability.
• Round out your legal toolkit with a Privacy Policy, Website Terms & Conditions, supplier and employment contracts, and a Shareholders Agreement if you have co-founders.
• Review your trading terms regularly as your business changes, and get a legal review to ensure they remain fair, compliant and enforceable.

If you’d like a consultation on preparing or refreshing your terms of trade, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.