Barter systems … are there special “watch-outs” for businesses?

The cashless exchange of goods and services is popular in some countries, and New Zealand has its own licensed trade exchange operating outside the cash economy.

There is also the potential for social enterprises to make greater use of community exchange systems, such as food cooperatives which involve direct trade of goods and services.

However, there can be risks associated with using these barter systems in a business context.

In a 2012 case, two companies (Aditude Advertising Limited and Techday Limited), were members of the Bartercard system, a cashless goods and services exchange system. Unfortunately for Aditude, it went into liquidation with significant credit in its Bartercard account for services rendered to Techday.

The liquidators of Aditude were unable to recover this trading credit in cash from Techday in court. The court found that because both companies had signed up to a cashless trading relationship, one party could not change the terms of the relationship and demand cash from the other.

While the “debt” could have been “recovered” by requiring Techday to perform services or provide goods, this was not much help to the liquidators of Aditude or its creditors.

While this case only deals with one aspect of the use of barter systems in business practice, it does show that companies need to negotiate robust trading arrangements and supply agreements and ensure that they, and their creditors, are aware of the risks involved.

For advice about your business and trading arrangements, contact us on (04) 473 6850.