Monthly Archives: December 2010

Contract Law and Terms of Business

Posted by diane.bantten

Contract Law – a recent case.

Azimut-Benetti SpA v Healey [2010]

A contract contrained a clause entitling a yacht building company to damages of 20% of the full contract price on the buyer’s default.  The buyer argued that the clause was a penalty clause and thus unenforceable.  The trial judge disagreed finding that the clause was commercially justifiable as providing a balance between the parties upon lawful termination.

This brings me neatly on to terms and conditions of business.  What do you do if you don’t have any?  You could :-

1. Write your own.

2. Download a template from the web.

3. Let your solicitor or lawyer have a go.

4. Copy some terms from a competitor.

5. Let Acquit write your terms.

Whichever option you choose should depend upon why you need business terms and conditions. Do you want some professional-looking text simply to look, well, professional? If so, then all you need to do is choose Option 2 i.e. download a cheap generic set of terms from the web.

If, however, your business will be offering goods or services on credit then you need a set of business terms suited for this purpose. This is because a great set has the ability to:

i) help prevent late payment by your customers or debtors. ii) give you real options in case of late payment or non-payment by your customers.

1. Write your own. If you have some legal training or higher education in commercial and contract law, then you could draft your own terms. But how long would it take you? And how can you be sure that you include everything important, especially from a credit management perspective?

2. Download a template from the web. If you are on a tight budget then this might be an option. But do you know who wrote the original terms and conditions template? Do they work in practice? How will they stand up in court if you need to enforce your rights? Who will create the additional clauses you’ll need for your particular business and industry? How much customisation is possible? And, again, how can you be sure that they include everything important, especially from a credit management perspective.

3. Let your local solicitor or lawyer have a go. Yes, they have the training. But in practice, how many sets of terms do they create for local businesses on a regular basis? One or two a month is usual because many solicitors are also busy focusing upon divorce, conveyancing, probate and litigation work. And the biggest question here is how much will a solicitor charge you for a fully bespoke set of terms and conditions?

4. Copy from a competitor. Whatever you do, don’t be tempted to copy a competitor’s terms and conditions. If you are caught, then there could be financial penalties and even worse, the negative publicity to suffer as a consequence.

Copied terms are rarely sufficient to protect the business fully. This deficiency is usually due to either lack of relevant credit management terms or the absence of clauses which address key legislation such as the Data Protection Act, Sale of Goods Act etc.

5. Ask Acquit Debt Recovery to create your business terms and conditions. We will fully-customise for you a set of terms and conditions that will be right for your business.

It is possible to word your terms so that your business can benefit financially from a free debt collection service and from massive improvements in your cash-flow.

To Sue or not to Sue!

Posted by diane.bantten

Damned if you do …….. Damned if you don’t!

Early American evangelist Lorenzo Dow (d. 1834) coined these words while condemning other preachers who ‘make the Bible clash and contradict itself, by preaching somewhat like this: ‘You can and you can’t – You shall and you shan’t – You will and you won’t – And you will be damned if you do – And you will be damned if you don’t
I am applying the term to the situation where you have provided a service to a client and haven’t been paid, your credit control procedures have been followed, reminders and statements sent and yet you still haven’t received payment. Do you send 7 day letter or not?
I have been in the Debt Recovery arena for a couple of decades, however, it never ceases to amaze me when clients are reluctant to enforce their terms and conditions of business. I have a client who is currently owed tens of thousands of pounds but will not event write a “gentle reminder” requesting payment. When I voice my exasperation I am advised that they are a “good” client and they don’t want to upset them. What my client is doing is acting as an unpaid bank and at the same is out of pocket for his troubles. My client has provided the service, the goods, the labour and in turn has paid its suppliers and its workers – why then shouldn’t they expect payment?
I have said previously, I really do hate being the harbinger of doom and gloom but in case you hadn’t noticed the economic climate is not in the best of health.
Of course it is necessary to maintain a good relationship with your clients or customers but not to the detriment of your own business and cash-flow.
If you find yourself in a position of non payment with a long established client where you have a good relationship then pick up the telephone and talk to them! They really won’t mind – they too are in business and will understand the need to be paid (preferably on time!). By talking to your client you will be able to establish whether there is a problem. If you think that your client or customer is in financial difficulty obtain a credit report – this will help you make a decision about whether you need to act. He who shouts loudest generally gets paid!
So, to sue or not to sue?
If your calls have fallen on deaf ears and your reminder letters have been ignored then send them a FINAL REMINDER – once you have issued this if you fail to follow it through you weaken your position. If after 7 days you still haven’t been paid then get your Solicitor or Debt Recovery agent to issue a pre action warning – at this stage lump on your interest and compensation. You can of course follow the action yourself with a claim; however, it really is best to get a professional to help you.

If you decide not to sue get your book-keeper to write it off and claim the VAT if applicable. If you do decide to sue, here’s an overview of the procedure:-

1. You lodge a Claim form at Court along with two copies – the court fee will depend upon the size of the debt – for instance, for debts between £1,000 – £1,500 the court fee will be £75.00 (if you issue a “claim on line” then the court fee is £70.00).

2. Once the Court has received your claim it will assign it a case number and then send a copy of the claim to the Defendant, i.e. your customer. Once the Defendant has received the claim they have 14 days to acknowledge the claim. If they ignore it you can apply for Default Judgment. If they file an acknowledgment unfortunately you have to wait a further 14 days.

3. Let’s assume that they have ignored the claim, you have your Judgment – what now? The Judgment is a useless piece of paper unless you enforce it………… I will give you some top enforcement tips in my next article – watch this space!
In the meantime, if you have any queries or would like to clarify any of the above please get in touch.