When you’re starting or running a business, paperwork often sits at the bottom of the priority list. Many businesses operate on trust, handshake deals, or a few emails back and forth - until something goes wrong.
One of the most common gaps we see is businesses operating without clear terms of trade or terms of engagement. The assumption is often that they’re optional or only for “big” businesses.
What are “terms” and why do they matter?
Terms of trade and terms of engagement set out the rules of the relationship between a business and its customer or client. They usually cover things like:
What work will (and won’t) be done
What’s being supplied (goods, services or both)
Pricing and payment terms
Timeframes and delays
Risk and responsibility
What happens if there’s a dispute
They don’t need to be long or complicated - but they do need to be clear and fit for purpose.
Are terms legally required?
In most cases, there’s no strict legal requirement to have written terms. A contract can exist even if nothing is signed.
The problem is this: if you don’t set the terms, the law will.
Without clear terms, businesses are often exposed to:
Disagreements over price or payment timing
Arguments over scope of work
Unexpected liability for loss or damage
Costly disputes that could have been avoided
Terms of trade vs Terms of engagement
Different businesses need different types of terms:
Terms of trade usually sit with businesses supplying goods (often on credit)
Terms of engagement are better for businesses providing services or advice
Businesses that do both might need a tailored approach
Using the wrong type of terms can leave gaps, even if something is written down.
Why businesses get caught out
We regularly see disputes that start with:
“That’s not what we agreed”
“I assumed that was included”
“I didn’t know there would be extra costs”
Without clear terms, it becomes your word against the clients.
Beware the internet template trap
Using generic templates found online can be tempting, but they often:
Don’t reflect how your business actually operates
Aren’t tailored to New Zealand law
Include clauses that are unenforceable
Are never properly used or updated
Even good terms won’t help if they’re never clearly brought to the customer’s attention.
What good terms actually do
Good terms of engagement don’t scare clients away. In fact, they:
Set expectations early
Reduce misunderstandings
Make disputes easier to resolve
Protect both sides
They also signal that your business is professional, organised, and credible.
The takeaway
If your business relies on clients paying you, trusting you or relying on your work, or receiving goods or services from you, clear terms aren’t a “nice to have” they’re a basic risk management tool.
Getting them right early is far cheaper than trying to fix things once a dispute has already started.