Is your credit account documentation up to date?

At McMahon Fearnley Lawyers, we can assist you with reviewing your terms and conditions whilst considering the changing circumstances credit professionals face on an almost daily basis. We are available to discuss any concerns or queries you may have, swiftly, and in the most practical manner for your needs.

Below is a checklist to see if your T&Cs are up to date with the latest evolution of terms and conditions

Some matters of consideration for a Credit Management Professional –

An Application for Commercial Credit Account

  • This is a package of documents which includes: 
    1. Terms and Conditions of Sale to be accepted by the customer before a credit account is opened by a supplier for that customer.
    2.  Guarantee and Indemnity being signed by customer to guarantee the performance and obligations of the customer under the Terms and Conditions of Sale. If the customer is a company, then the director(s) of the company shall sign the Guarantee and Indemnity.
    3.  The Application for Credit Account with the attached Terms and Conditions of Sale. This is the formal agreement covering all future suppliers of goods to the customer which is commonly characterised as an umbrella security agreement.
  •  It is essential that a Credit Professional ascertain from the customer the correct legal identity of the customer (i.e., sole proprietor, company, partnership, partnership of trusts, or corporate trustee). 
  •  The application should expressly state that the customer applies for a Credit Account and the supplier agrees to the Application on the basis that the customer agrees to the Terms and Conditions of Sale and the guarantee and indemnity which are both attached to the Application.
  •  The application should also include a Privacy Statement to ensure that the customer and guarantor understand, provide informed consent and agree to authorise the supplier to investigate the creditworthiness of the customer and guarantor.
  •  Th application should also provide that the directors/partners of the customer sign and warrant they are authorised to sign on behalf of the customer.

Terms and Conditions of Sale

The Terms and Conditions of Sale for commercial suppliers should include approximately 10 main clauses concerning –

  1. Price and Payment: This clause specifies terms requiring payment of goods by a due date including any interest or outstanding accounts. This varied on a case-by-case basis depending on the nature of the business.
  2. Risk and Title: This clause expresses in terms ownership of the goods, and risks and liabilities of goods when ownership is passed.
  3. Delivery: It contains terms of delivery based on timing such as on-time delivery (OTD) or on-time in full (OTIF) and expresses any defaults in goods being returnable under certain condition depending on the nature of the business.
  4. Security Agreement and Security Interest under the Personal Property Securities Act 2009 (PPSA): This clause contains terms to protect your business’s goods, inventory, and property pursuant to the PPSA.
  5. Enforcement: This clause contains terms for events that may be deemed as breach of the business’ terms and conditions.
  6. General Provisions: This clause contains subclauses specific to the nature of your business which may include but not limited to time, force majeure, confidentiality, change in customer, certificate of indebtedness, severance of invalid provisions, entire agreement, set off, notices, interpretation and governing law.
  7. Survival of Indemnity: Depending on the nature of your business, specific terms can be used to avoid or enforce an obligation under your business’ terms and conditions.
  8. Exclusion of implied terms: This clause is to protect your business from promises or assumptions that is not clearly expressed in a contract to the extent that is permitted by law.
  9. Limitation of liability: This clause expresses in terms the extent of liability permitted by law for it so it is not unfair to parties involved.
  10. Definitions: This clause will provide terms that are relevant to define in correlation with general provisions and the specific nature of your business.

Guarantee and Indemnity

A Guarantee and Indemnity is a Deed or an Agreement between your business and the customer to ensure performance and obligations of the parties are in conjunction with terms and conditions of sale. It is important to note that a Deed and an Agreement are different and separate documents that are interrelated.

McMahon Fearnley Lawyers are experienced in providing professional advice on commercial and contract matters without the legal jargon. We can assist in revising or creating terms and conditions that reflects your business’s specific needs. Additionally, our Commercial Litigation lawyers can assist in advising and prosecuting contested agreements, deeds, and breaches of terms.

If you have any questions or need assistance with your commercial agreements, we are here to help. Get in touch with us today and leave the legal paperwork to our commercial experts so you can focus on running your business.

To learn more about how McMahon Fearnley can assist you, get in touch today.

The information contained in this blog post is based on the law at the date of publication. It is of a general nature only and not intended to be legal advice. It is recommended you seek professional advice if you require legal advice or intend to take any action based on the information contained in this blog post.

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