Supplying Goods and Services on Credit

Business proprietors often agree to trade with their clients and customers where “credit terms” are the norm. Businesses in so doing need to ensure that their documentation is adequate.

Terms of Trade

When contracting with a business a customer will often be confronted with a myriad of documents that are meant to inform and regulate the contractual arrangement between the supplier and the customer.

For a business extending credit to a customer, it is critical that they have developed their own “terms of trade”. The terms will generally set out how the goods will be supplied; how credit is given; how payment is to be made, and when title to goods might pass (this is called a retention of title clause).

We frequently come across businesses wishing to sue a customer who has failed to make payment for goods or services and often find that the business has not developed a policy as to their terms of trade or if there is, it has not been properly documented.

It is trite to observe that if a business has prepared documentation, it is not of much use if it has not been properly completed. This observation is particularly important where the customer is a company and likely, in some cases, to have little or no assets. In such a circumstance, in extending credit, the business would normally obtain personal guarantees from the directors of the company so that if the company defaults in payment, then the directors become liable.

Author: Kent Mallinson

Published: 4 July 2014


The information in this article is general in nature and is not to be relied upon as legal advice. As always, we recommend you seek thorough legal advice to consider your own circumstances and determine whether the information contained in this article is applicable to you.  This article is current as at the date of publishing but will not be updated as circumstances change.