We recommend that Creditors should regularly review their terms of business to ensure they are legally enforceable and maximise protection against bad debt.

Here are some of the points that should be considered:

• Retention of title to goods supplied can be a useful weapon when faced with insolvent customers. A simple ‘all monies’ clause is usually appropriate. If you have a clause which purports to allow you to trace the proceeds of sale, the clause may not be legally enforceable and should be reviewed. It is vital that your goods can be easily identified if the clause is to be legally enforceable.

• We recommend that your terms should include a provision enabling you to recover legal costs in full. This allows Creditors to recover the cost of collection incurred where litigation is not necessary. Why should you be out of pocket for solicitor’s letters and telephone calls? We have standard letters which indicate to the customer the charges incurred to date. Delaying tactics are less likely to he deployed if there is a cost attached!

• For contracts which involve the supply of goods or services over a long period, it is wise to provide for the right to suspend supply in the event of default or insolvency. Many Creditors suspend supplies without having any contractual right to do so. This can result in a claim for damages from the Customer and can then be used to justify withholding payment for supplies already invoiced.

• If you deal with consumers in the retail market, your terms of trading must be fair and intelligible in order to be enforceable under the Unfair Terms in Consumer Contracts Regulations. Trading Standards Officers and the Office of Fair Trading are on the warpath!

• Remember that terms of trading are of no use if they are not shown to the customer before or at the time the order is placed. Orders taken by telephone or fax can create real problems. The best solution is to get customers to sign a credit application form which Incorporates your terms before you start business with the customer.

We offer a free audit of our clients’ terms of business so don’t wait until it’s too late! 
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