At Commercial Collections, we recover debts for subcontractors and tradespeople across New Zealand every day. The single biggest factor that determines whether a debt recovery goes smoothly or becomes a drawn-out battle is something most subbies don't think about until it's too late: their terms and conditions.
We're not exaggerating when we say that proper T&Cs can be the difference between getting paid in full — including our commission — at no cost to you, and spending months chasing a debtor with limited legal leverage. If you take one thing away from this article, let it be this: get your terms and conditions right, and get them to your client before you start any work.
Why T&Cs Matter More Than You Think
Terms and conditions are a legally binding agreement between you and your client. They establish the rules of engagement: when payment is due, what happens if payment is late, who bears the cost of debt recovery, and how disputes are handled. Without them, you're relying on goodwill — and in our experience, goodwill evaporates quickly when money is tight.
For subcontractors, T&Cs are particularly critical because you often carry significant costs — materials, labour, equipment hire — before you see a cent from the party that engaged you. If that party decides not to pay, or starts disputing the work after the fact, your T&Cs are the document you'll rely on to enforce payment.
The Number One Mistake: Putting T&Cs on Invoices
We see this constantly. A subcontractor prints their terms and conditions on the back of their invoices, or includes them as a footnote at the bottom. They assume this means their client has accepted those terms. Unfortunately, that's almost certainly not the case.
For terms and conditions to be enforceable, they need to be communicated to and accepted by the other party before the contract is formed — that is, before the work is agreed upon. An invoice is issued after the work has been done, which means the client never had the opportunity to review or agree to your terms before they engaged you. In legal terms, the terms on your invoice were never incorporated into the contract.
This distinction matters enormously when it comes to debt recovery. If your T&Cs include a clause allowing you to recover collection costs from the debtor (which they should), but those T&Cs were only ever on your invoices, a court or adjudicator may rule that clause unenforceable. That means you'll be paying our commission out of your own pocket instead of recovering it from the debtor.
When and How to Issue Your T&Cs
The golden rule is simple: your terms and conditions must be provided to your client before you agree to do any work together. Here are the practical ways to achieve this:
- Include them with every quote. Attach your T&Cs as a separate page with your quote, or reference them clearly in the quote document.
- Send them before charge-up work. If you're doing day-rate or charge-up work without a formal quote, email your T&Cs to the client and get written acknowledgement before you start.
- Get a signature where possible. A signed acceptance removes any ambiguity. Even a simple email reply saying "accepted" or "agreed" provides strong evidence of acceptance.
- Reference them on purchase orders. If a client issues you a purchase order, make sure your T&Cs are referenced or attached. Don't rely on the client's purchase order terms alone.
Don't be put off by the idea of sending terms and conditions to your clients. Your clients won't mind — in fact, it makes you look more professional. Most of the suppliers you deal with have probably given you their T&Cs in advance as well.
What Your T&Cs Should Include
Every set of terms and conditions is different, but for subcontractors in the New Zealand construction industry, there are several clauses that should be considered essential:
Payment Terms
Specify when payment is due — typically 14 or 20 working days from the date of invoice. Under the Construction Contracts Act 2002, if you don't specify payment terms, the default provisions apply: the payer has 20 working days to respond to a payment claim.
Interest on Overdue Payments
Include a clause that charges interest on overdue invoices. A common rate is 2% per month (24% per annum) on outstanding balances. This creates a financial incentive for clients to pay on time.
Debt Recovery Costs Clause
This is arguably the most important clause for your bottom line. A well-drafted recovery costs clause states that if the client fails to pay and you need to engage a collection agency or solicitor, all costs of recovery are payable by the debtor.
Our commission is 30% of what we recover — but with the right T&Cs, that 30% comes from the debtor, not from you. This is the single most impactful clause in your terms.
Retention of Title
If you supply materials as part of your work, include a retention of title clause stating that ownership of those materials doesn't pass to the client until full payment has been received.
Variations and Additional Work
Your T&Cs should address what happens when the scope of work changes. Specify that variations must be agreed in writing, and that additional work will be charged at your standard rates.
Dispute Resolution
Under the Construction Contracts Act 2002, you have the right to refer payment disputes to adjudication regardless of what your contract says. Having a clear dispute resolution process in your T&Cs demonstrates professionalism and sets expectations.
Right to Suspend Work
The Construction Contracts Act gives you the right to suspend work if payment is overdue. Your T&Cs should reinforce this right and make it clear that suspension due to non-payment does not constitute a breach of contract on your part.
The Construction Contracts Act 2002: Your Safety Net
The CCA exists specifically to protect parties in the construction industry from unfair payment practices. It provides a framework for progress payments, payment claims, and dispute resolution that applies to all construction contracts in New Zealand — regardless of what the contract itself says.
Key protections include default payment terms, the right to issue payment claims and receive payment schedules, a fast-track adjudication process, the right to suspend work for non-payment, and the prohibition of pay-when-paid clauses.
However, the CCA works best when used in conjunction with well-drafted T&Cs. The Act provides the legal framework, but your terms provide the specific details that strengthen your position — particularly around collection costs and interest.
What Happens When You Don't Have Proper T&Cs
We see the consequences regularly. A tradesperson does excellent work, sends an invoice, and the client simply doesn't pay. Without proper T&Cs:
- You can't recover interest on the overdue amount, so the client has no financial incentive to pay quickly.
- You can't recover collection costs from the debtor, so our commission comes out of your pocket — reducing your recovery by 30%.
- The debtor may dispute the scope of work, and without clear terms about variations, you have limited evidence to prove what was agreed.
- If the matter goes to court, the proceedings take longer and cost more because there's no agreed framework for resolving the dispute.
Compare this to a subcontractor who has proper T&Cs in place. When we contact the debtor, we can point to the specific clause that makes them liable for collection costs. This alone often brings debtors to the table quickly.
Even If You Haven't Done This Before, Start Now
If you've been operating without proper T&Cs, don't panic — but do act. You can't retroactively apply terms to existing contracts, but you can start issuing them on every new job from today.
For existing clients you work with regularly, send them your updated terms and ask them to acknowledge receipt. Many ongoing commercial relationships operate on a rolling basis, and a new set of terms can be incorporated into that relationship going forward.
Free Templates and Help
We offer free T&C and invoice templates through our Client Toolbox. These templates contain the minimum clauses you need to protect yourself, including the debt recovery costs clause that allows us to recover our commission from the debtor.
If you get in touch, we'll be happy to talk you through what's needed — free of charge and with no obligation.
The Bottom Line
Your terms and conditions aren't just legal boilerplate — they're the foundation of your ability to get paid. They protect your cashflow, give you leverage in disputes, and ensure that if a client doesn't pay, you can recover the debt without it costing you a cent. Get your T&Cs in order, issue them before work begins, and if someone doesn't pay — call us.