General Trades Terms of Trade

What Is a General Trades Terms of Trade?

A General Trades Terms of Trade is a legal document that sets the rules between a tradesperson and their client. It outlines how work will be done, how and when payment must be made, and what happens if things go wrong. Unlike a specific contract for a single job, Terms of Trade are standard conditions that apply to every client or job a business takes on.

For Australian tradies, this document is the backbone of the business relationship. It acts as a safety net for cash flow and a clear guide for service delivery. When a client signs a quote or accepts an invoice, they are usually agreeing to these terms.

Many Australian trades businesses integrate these terms into their accounting or job management software, such as Simpro, ServiceM8, or AroFlo. This ensures the terms are automatically attached to every quote and invoice sent. Having a solid set of terms helps distinguish between residential consumers and commercial clients, as the laws and risks differ significantly between the two.

When to Use This Document

You should use a General Trades Terms of Trade for almost every business transaction. They are essential for any trade business that wants to protect its income and manage risk.

Residential Work For homeowners, Terms of Trade clarify what is included in the price. They define the payment schedule and what happens if the client changes their mind. However, you must be careful. In some states, specific laws govern domestic building contracts. For example, in Victoria, you cannot use general terms for jobs over $10,000; you must use the prescribed Major Domestic Building Contract. In Queensland, jobs over $3,300 require a QBCC approved form. For smaller jobs or service work (like a repair call-out), general terms are perfectly suitable.

Commercial Work Terms of Trade are critical for business-to-client (B2B) relationships. They allow you to set strict credit terms, define liability caps, and charge interest on late payments. Commercial clients often have their own contracts, but your Terms of Trade provide a baseline if you are issuing standard quotes or invoices.

Subcontracting If you are a subcontractor working for a head contractor, your Terms of Trade form the basis of your agreement. They ensure you get paid according to the Security of Payment laws in your state.

Supply of Goods If you sell materials as well as labour, such as a bathroom supply and install, Terms of Trade are vital. They allow you to retain title to the goods until the client pays for them, provided you follow the Personal Property Securities Act (PPSA) requirements.

Key Sections and Required Elements

A robust Terms of Trade document must cover several specific areas to be legally effective in Australia. Below are the essential sections.

Basis of Quotation

This section defines exactly what the client is paying for. It should state that the quote is valid for a specific period, usually 30 days. It must specify what is included in the price and, importantly, what is excluded.

• Provisional Sums and Prime Cost Items: You must clearly state if an allowance is an estimate for items not yet selected, such as tapware or tiles. If the client chooses more expensive items, the price increases.
• Site Conditions: Best practice dictates including a clause about site conditions. If you discover asbestos or other hazardous materials during renovation, the client should be liable for the testing and removal costs.

Variations to Scope

"Scope creep" is a common cause of disputes. This section requires that any changes to the original work must be confirmed in writing (email or text is acceptable) before the extra work begins. The clause should state that variations will be charged at the current rates and will be added to the final invoice. This is a requirement under many state building acts and is crucial for progress claims under Security of Payment laws.

Payment and Invoicing

Cash flow is the lifeblood of a trade business. This section sets the payment rules.

• Timeframes: Standard terms are often 7 days for commercial clients. For residential jobs, a deposit upon commencement and progress payments are standard.
• Late Fees: You may include a clause for interest on late payments. However, you must ensure these fees are not excessive or penal, or they may be deemed unfair under the Australian Consumer Law.
• Method of Payment: Specify how you accept payment (EFT, credit card, etc.) and who bears the transaction fees.

Site Access and Delays

You need protection if you cannot work due to factors outside your control. This section gives you the right to suspend work if the site is unsafe or inaccessible. It should also provide for an "Extension of Time" (EOT) if the client delays the project, such as failing to make selections on time. This prevents the client from claiming damages against you for finishing late.

Limitation of Liability

This section attempts to cap your financial risk. For commercial clients, you can usually exclude "consequential loss," such as the client's loss of profit or rental income due to a delay. You can also limit your liability to the cost of rectifying the work or the value of the contract. Note: You cannot exclude liability for personal injury or death due to negligence, and you cannot contract out of the Consumer Guarantees under the Australian Consumer Law for residential consumers.

Personal Property Securities (PPSA)

If you supply goods that remain the client's property until installed or paid for, you need a PPSA clause. This allows you to register your interest on the Personal Property Securities Register (PPSR). Without this registration, a "Retention of Title" clause is useless if the client goes bankrupt.

How to Write a General Trades Terms of Trade (Step by Step)

Creating a Terms of Trade document is a straightforward process, but it requires attention to detail.

Step 1: Define the Parties

Start by clearly identifying who the agreement is between. Use a placeholder like "The Contractor" (you) and "The Client" (them). Include a clause that says the client accepts these terms by accepting a quote or approving an invoice.

Step 2: Set the Scope of Work

Draft the "Basis of Quotation" section. Be precise about your hourly rates and call-out fees. Include a statement that verbal quotes or estimates are subject to a written confirmation. Ensure you mention that all work is carried out in accordance with relevant Australian Standards and the Building Code of Australia.

Step 3: Address the Money

Write clear payment terms. Decide on your deposit structure. For residential work, do not ask for more than 10% as a deposit if the total is over $20,000, as this is the legal cap in some jurisdictions. Define your progress payment milestones. For example, "25% deposit, 25% at framing stage, 25% at lock-up, and 25% on practical completion."

Step 4: Insert Legal Protections

Draft the clauses regarding liability and warranties. You must state that you acknowledge the Consumer Guarantees under the Australian Consumer Law. You cannot promise to exclude these guarantees. However, you can limit your liability to the cost of replacing the goods or supplying the services again.

Step 5: Include Dispute Resolution

It is cheaper and faster to solve disputes out of court. Include a step-by-step process. For example, "If a dispute arises, the parties must first attempt to resolve it via negotiation. If that fails, they must attend mediation." This is often a requirement before engaging in litigation or adjudication.

Step 6: Incorporate by Reference

Ensure the terms are legally attached to your quotes and invoices. Use a specific clause on your quote document: "Works are undertaken pursuant to our Terms of Trade dated [Date] available at [URL] or attached hereto." A simple link in a footer is sometimes not enough. The client must have a reasonable opportunity to read the terms.

Common Mistakes to Avoid

Using "Pay When Paid" Clauses One of the biggest mistakes in the construction industry is including a clause that says you only get paid when you get paid by the client upstream. In many Australian states, such as New South Wales under the Building Industry Security of Payment Act, these clauses are void. You have a statutory right to be paid for the work you have done, regardless of whether your client has been paid.

Attempting to Contract Out of Consumer Guarantees You cannot legally tell a residential client that you provide no warranties. Under the Australian Consumer Law, services must be provided with due care and skill. If you write a term saying "No refunds" or "No warranties," the ACL will render that term void, and you could face fines from the ACCC.

Ignoring State-Based Regulations Do not use a generic set of terms for a major home renovation without checking your state laws. In Victoria, Queensland, and New South Wales, residential building work over certain thresholds requires specific government-approved contracts. General Terms of Trade are not a substitute for these prescribed forms.

Forgetting the PPSR Registration Many tradespeople include a Retention of Title clause thinking they own the materials until paid. If the client goes into liquidation and you have not registered your interest on the PPSR, you become an unsecured creditor. You will likely lose your materials and your money.

Unfair Contract Terms Since late 2023, small business contracts are also protected from unfair terms. Avoid terms that allow you to unilaterally change the price, terminate the contract without cause, or avoid liability while the client cannot. The ACCC actively polices this. A contract cannot be significantly unbalanced or create a significant detriment to the other party.

Legal Considerations (AU)

The Australian Consumer Law (ACL) The ACL is contained in the Competition and Consumer Act 2010. It applies to all tradespeople dealing with consumers. It prohibits unfair contract terms and provides consumer guarantees that cannot be excluded. If you breach the ACL, you can face significant penalties. You must ensure your terms are transparent and not significantly unbalanced.

Security of Payment Acts (SOPA) Each state and territory has legislation regarding security of payment in the construction industry. These laws give you the right to progress payments and a fast-track adjudication process for disputes. Your Terms of Trade must not contain provisions that contract out of these rights.

Privacy Act 1988 (Cth) While many small trades with a turnover under $3 million are exempt from the Privacy Act, it is best practice to include a Privacy Collection Notice. If you collect Tax File Numbers or work in a supply chain for larger businesses, you must comply. Tell your clients what data you collect and why.

Work Health and Safety (WHS) As a business owner, you have duties under WHS laws. Your Terms of Trade should outline that the client is responsible for site safety where they have control. For example, the client must ensure the site is free of hazards like asbestos before you start, or they must pay for the removal.

Taxation Ensure your terms comply with ATO requirements. You must state that prices include GST where applicable. You should also include a clause stating you retain ownership of the goods until payment is received in full, which links back to your PPSA registration.

Frequently Asked Questions (preview)

Do I need a lawyer to write my Terms of Trade? While you can use templates, it is highly recommended to have a lawyer review them. They can ensure you comply with the ACL, PPSA, and specific state building legislation. A small investment now can save you thousands in legal fees later.

Can I charge interest on late invoices? Yes, you can, provided it is not considered a penalty. You must specify the interest rate in your terms, usually a percentage above the current cash rate of the Reserve Bank of Australia. Ensure this rate is reasonable so it is not struck out as an unfair contract term.

What is the difference between a Quote and a Terms of Trade? A Quote is a specific offer to do a job for a specific price. The Terms of Trade are the general conditions that apply to that offer. The Quote defines the "what" and the "how much," while the Terms of Trade define the rules of engagement.

How often should I update my Terms of Trade? You should review them annually, or whenever there is a major change in the law. For example, the recent expansion of unfair contract laws to small businesses is a significant change that requires a review of your current documents.

Are email signatures valid on these documents? Yes, in Australia, electronic signatures are generally legally binding under the Electronic Transactions Act 1999 (Cth) and corresponding state laws. An email reply stating "I accept your terms and quote" is usually sufficient to form a binding contract, provided the terms were attached or linked in the original email.