Terms and conditions: 10 key protections for suppliers

At the time of writing, New Zealand is in a technical recession. High rates of interest and inflation, and rising labour and wage costs, are creating challenging economic and financial conditions for New Zealand businesses.

Market commentators have confirmed a steady increase in business failures throughout New Zealand in 2023, particularly in the retail, construction, property and real estate sectors, and they anticipate this trend to continue for the remainder of the year. Data company, CreditWorks, confirms that an overall negative trend returned in April, with overdue debt (60 and 90 days past due) continuing to grow in value and percentage.

Now, more than ever, suppliers of goods should be re-visiting their Ts&Cs to ensure they have adequate protections in place.

This article sets out 10 key protections for suppliers to consider when reviewing their Ts&Cs:

1. Security interest

A retention of title clause (also known as a Romalpa clause) ensures that ownership of goods stays with a supplier until the customer has paid for the goods in full. It is an important clause because it gives a supplier the right to reclaim goods, or their value, from the customer if the customer defaults.

The right or interest this clause gives to a supplier – a ‘security interest’ – is governed by the Personal Property Securities Act 1999 (PPSA).  (A ‘security interest’ under the PPSA is, in general terms, an interest in any form of property other than land that secures payment or performance of an obligation.)

Critically, a retention of title clause will not, by itself, offer a supplier complete protection; the supplier must also, and with the agreement of the customer, lodge public notice of its interest, in the prescribed form, on the Personal Property Securities Register (PPSR). A supplier does this by registering a ‘financing statement’ on the PPSR in relation to the goods supplied, the customer’s other personal property, or both.

In a situation where multiple suppliers have taken security against the same customer, the priority of rights against that customer will generally go to the supplier that first registers a ‘financing statement’ on the PPSR.

So, in summary, we recommend that a supplier’s Ts&Cs should: (1) acknowledge that the customer is granting a ‘security interest’ to the supplier; (2) require an accurate description of the ‘personal property’ that is the subject of the ‘security interest’; and (3) acknowledge that the supplier has the right to register a ‘financing statement’ on the PPSR in relation to its ‘security interest’. The supplier should obviously, also, have a PPSR-registration programme in place.

2. Collections and solicitor costs, interest

Collections and solicitor costs clauses allow a supplier to recover their legal fees, and collection / debt recovery agents’ charges, from the customer, if the customer breaches the agreement with the supplier.

Such clauses can be valuable provisions for businesses because they can help to protect against the high costs of litigation, deter frivolous litigation, level the playing field between businesses of different sizes, and guard against the risk of being sued.

A supplier may also want to consider including a clause in its Ts&Cs that imposes interest in the event of default (e.g. on overdue payments). Like solicitor and collections costs clauses, this type of clause can help incentivise customers to pay on time. It also compensates the supplier for any delays in payment. For reasons discussed under point 8 below, any default interest charged should be fair and reasonable in the circumstances.

3. Right to appoint a receiver

A supplier should consider having the right, in its Ts&Cs, to appoint a receiver if a customer breaches its obligations to the supplier.

A receiver is a licensed insolvency practitioner, appointed by a creditor (or a court), to collect outstanding debts or take possession of assets, and sell them, if a customer defaults.

Importantly, for a supplier to be able to appoint a receiver, that appointment right must be agreed by the customer and the supplier in writing; if a supplier wants to be able to appoint a receiver over a customer’s assets, the supplier’s Ts&Cs should specifically include that right.

4. Caveat, mortgage over land

The PPSA does not govern interests in relation to land.

A supplier may, therefore, want to consider whether its Ts&Cs should include a right for the supplier to lodge a caveat, and / or take and register a mortgage, over the customer’s land. While it might appear to be a relatively extreme position, it gives a supplier confidence and recourse to an asset of significant value, and it highlights to the customer the seriousness of the supplier’s desire to protect its interests.

5. Power of attorney, electronic signing

A supplier should think about requiring the customer to grant a ‘power of attorney’, to the supplier, in the Ts&Cs.

A power of attorney gives the supplier the right to take certain actions on behalf of the customer, without having to obtain the customer’s prior consent. This can include such things as signing documents (e.g. direct debit forms, consents to caveat, mortgages and PPSA-related documents) or taking legal action. Having the ability to implement these actions gives a supplier an effective means of preserving its rights, while minimising delays and losses.

Suppliers should note that, at the time of writing, an agreement containing a ‘power of attorney’ clause cannot be signed electronically; it must still be signed in ‘wet ink’.

6. Indemnities, limitations and exclusions of liability

A supplier should consider incorporating a mix of indemnities, and limitations and exclusions of liability, into their Ts&Cs.

An indemnity is an effective way of requiring a customer (or third party) to compensate the supplier for any specified loss, without the need to prove a breach or wrongdoing, or without the need for the supplier to mitigate (i.e. lessen) any losses.

Limitations of liability are sensible, as they allow a supplier to narrow the scope for potential liability under Ts&Cs. For example, a supplier might want to limit its liability solely to direct losses, and only up to a prescribed maximum amount.

A supplier should consider expressly excluding its liability, altogether, under its Ts&Cs for such things as indirect or consequential losses and, where legally permitted to do so, under certain legislation (e.g. the Consumer Guarantees Act 1993, the Fair Trading Act 1986 and the Credit Contracts and Consumer Finance Act 2003).

7. Guarantees, electronic signing

A guarantee gives a supplier an effective means of direct recourse, against a third party, where a customer defaults in its obligations, and is of particular value when a supplier is dealing with new or less-established customers. Ordinarily, a guarantee will come from a director or shareholder of the customer but, in some circumstances, it might be provided by a related company or trust.

A supplier should be mindful of the strict requirements at law (in statute and at common law in New Zealand) that must be satisfied for a guarantee to be valid and enforceable. The guarantee has to be in writing, it must be signed by the guarantor and the guarantor must agree to be responsible for the customer’s liability or breach. Guarantees and indemnities from trusts require all trustees to sign. Also, if the Ts&Cs require the guarantor to enter into a separate deed of guarantee, then the supplier should ensure that that step is satisfied.

Unlike ‘powers of attorney’, guarantees can be signed (and witnessed) electronically. Further, if a guarantee is prepared in the form of a ‘deed’, it can also be signed (and witnessed) electronically, however the requirements of the Contract and Commercial Law Act 2017 must be satisfied.

8. Termination rights, ‘unfair contract terms’

A termination right gives a supplier the ability to end an agreement with a customer if adverse circumstances arise.

The clause should clearly state the circumstances under which the supplier can terminate the agreement (e.g. if the customer becomes insolvent or if it fails to remedy a material breach) and what the customer’s obligations are to the supplier on termination (e.g. return all materials, immediately pay up all outstanding debts etc).

When it comes to termination rights, and other clauses that may have a material impact, suppliers should be mindful of the prohibition under the Fair Trading Act 1986 against ‘unfair contract terms’. In essence, the Act prohibits standard form B2B contracts (with an annual value of less than $250,000) from containing one-sided terms that significantly benefit one party to the detriment of the other. Ordinarily, these are terms which are provided on a ‘take it or leave it’ basis, without room to negotiate. In the context of termination rights, if a supplier’s Ts&Cs only give the supplier (and not the customer) the right to terminate, the termination clause ‘could’ be found to be an ‘unfair contract term’.

9. Parties’ names and identification

It probably should go without saying, but getting the legal names of your customer and guarantor(s) correct, when establishing the contract, is critical. Mistakes in this area can lead to much difficulty later on when it comes to enforcing the agreement, and, in the event of an insolvency, it could even put the entire debt at risk if security interests are not properly registered on the PPSR.

If you are dealing with companies, we recommend you search the records on the Companies Office website. If you are dealing with a trust or partnership, which may not be included in any register, make sure you get a copy of the trust or partnership deed and any related deeds of retirement and appointment of trustees or partners. That way you will have an accurate record of who the trustees or partners are.

10. Credit reporting

Finally, suppliers may want to consider a clause that gives them the right to report any customer non-payment or late payment to credit reporting agencies. Again, this has proven to be an effective means of incentivising customers to pay invoices on time.

This type of clause should specify the credit reporting agencies that the supplier is authorised to report to and the circumstances under which the supplier can lodge such a report.


When it comes to reducing the chances of loss, and improving your chances of recovery, the old adage “the best defence is a good offence” still rings true. Those parties who get things right at the start, with good Ts&Cs and proper registration of security interests, give themselves the best chance of recovery if something goes wrong with their customer and insolvency results.


For Ts&Cs involving the supply of credit, the above considerations are intended to apply to business-only loans rather than consumer credit contracts. The latter, which could be subject to the Consumer Guarantees Act 1993 and the Credit Contracts and Consumer Finance Act 2003, may warrant additional considerations.

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