Proper terms of trade vital
Farmer Freddy learns how the Personal Property Securities Act can protect his interest in goods supplied to a retailer on credit - however there are three steps to follow.
Farmer Freddy and his daughter, Pebbles sit down one Sunday over a coffee.
"You're looking very pleased with yourself today, Dad," remarked Pebbles.
"Well, remember those old macrocarpa trees I cut down last summer?" Freddy asks.
"Resourceful person that I am, I used the wood to make outdoor furniture - it's amazing what townies will buy. Anyway, Joe's going to sell it through his garden centre."
"That's great, Dad," Pebbles replies. "Sorry to be boring at a time like this, but did Joe pay you for the furniture when you delivered it?"
"No - he'll pay me when it's sold. But don't worry - I remembered what you told me, and I put a clause in the invoice to make it clear I own the furniture until Joe pays me in full." Freddy says.
"I think your memory's playing tricks on you, Dad. You must have heard that from someone else. You may be able to enforce that clause (called a retention of title or romalpa clause) against Joe. But the Personal Property Securities Act has introduced a whole new approach for protecting your interest in goods you supply to a retailer on credit." Pebble says.
"Don't worry, Pebbles. He won't let me down."
A few days later, a frantic, furious Freddy phones Pebbles.
"Pebbles, I need help. Joe's business has gone broke and a receiver's been appointed. When I went to get my furniture back, Joe told me the receiver's gone and sold it to raise money to repay secured creditors! They can't do that can they? It's mine isn't it?"
"Calm down, Dad. Pebbles counsels. "I've got some good news, and some bad news. The good news is that losing a couple of thousand worth of furniture isn't going to see you in penury, penniless on the streets. But the bad news is that you have indeed lost the furniture. You remember the Personal Property Securities Act rules I told you about?"
"Sort of," sobs Freddy, in anguish. "But can you run me through them again so I'm all right next time?"
Pebbles explains that before you supply any goods on credit you should take three steps:
- Ensure your terms of trade are up to date - that that they include a retention of title clause and deal with the Personal Property Securities Act properly.
- Ensure that the debtor signs the terms.
- Register a financing statement on the Personal Property Securities Register on-line.
"If you complete all three steps before you deliver the goods to the retailer, you'll be OK."
Freddy takes a deep breath to compose himself. "At least we've reached the seat of the problem, I suppose," he says. "I need to put appropriate terms of trade on the table next time, couched in suitable language."
"That's right, Dad," Pebbles says. "Now come on, cheer up."