Companies, Partnerships and Directors
Dealing with customers in a recession
Every business relies on its customers. In the present downturn it is more important than ever to ensure that you take control of the legal and commercial risks posed by your customers.
Terms of business
Terms of Business help to regulate the contractual relationship between you and your customers and provide protection. In the absence of these standard Terms of Business, you may find yourself subject to your customer’s own Terms of Business or trading, some of which may prove costly to you.
Some basic points you need to address in your Terms of Business are:
Retention of title
This means exactly what it says. If you supply goods to your customer, who is unable to pay, you may claim back the goods. Given the fact that so many businesses are facing financial difficulties such a clause may prove vital and will help you if your customer becomes insolvent.
Cash flow for any business is critical to its success. Payment terms are therefore of great importance and bringing these to your customers' attention is essential.
If your customer fails to pay on time you need specific contractual rights in your Terms of Business to refuse delivery of any further goods or suspend services and ultimately end the contract. Furthermore you need to have the ability to claim interest on any outstanding payments, including the option to charge interest at an enhanced rate.
Other issues which play an important part of the Terms of Business are those dealing with warranties, limitation of your liability and delivery and need to be considered carefully to provide maximum benefit to you.
When dealing with individual consumers rather than businesses, further care and attention is required as the law gives additional protection to them.
You should ensure that you have proper legal contracts with all of your customers in writing, if possible to provide you with adequate protection. Templates can be provided for businesses that currently do not have Terms of Business. Your standard Terms of Business should be reviewed every two or three years to ensure that they are up to date and take account of recent changes of law.