When your customers fail to pay their credit accounts by the due date and it comes time to pass the matter over to your solicitors for more serious recovery action, having quality terms of trade can prove invaluable.

Not only can terms of trade allow you to pass the costs of recovery on to your customer and allow for interest to run on the outstanding balance to the date of payment but they could also allow for other protections that can be used to seek Judgment when Court Proceedings are issued.

Such protections can be seen in a recent example where one of our clients instructed us to file Proceedings and seek Judgment for payment of outstanding money owing under a credit account.  The relevant protections included in our client’s terms of trade included:

1. Our client’s ability to exercise their discretion to allocate any payment made by the customer to the account as it saw fit; and
2. Payment of the amount owing to our client had to be made free of any counterclaim, set-off, deduction or other claim.

These provisions proved invaluable when the customer in question came into financial difficulties and tried to dispute the debt that was owing to our client and responded to the threat of litigation by stating that they would file a counterclaim. 

We were able to respond to the customer’s argument on two fronts.  Firstly by stating that as our client had allocated payments to the account as it saw fit the outstanding balance in question did not relate to the supply of goods that they disputed and secondly by pointing out that in any event they had agreed to terms which required them to make payment of the outstanding balance free of any counterclaim.

Our client successfully obtained Judgment against the customer for full payment of the money owing under the credit account.

Had these protections not been included in the credit contract then our client would have had to respond to the factual allegations raised and this would have delayed obtaining Judgment and put up costs as the case went through the standard rather than Summary Judgment processes.