Contract & Credit Application
Stonegate Legal can assist your business by providing legal services to establish a credit application process and draft legally enforceable contracts for credit agreements with customers.
Legal Assistance for Credit Applications and Contracts
Debt Contract Application
How Stonegate Legal Can Help Your Business
If your business offers credit to customers, it’s essential to have a robust credit application process and legally enforceable contracts in place to protect your financial interests.
Stonegate Legal provides legal assistance to establish credit application processes and draft contracts for credit agreements that are legally binding in the event of default. With extensive experience in debt recovery and credit enforcement, Stonegate Legal can help your business navigate the legal complexities of credit agreements and ensure that your contracts comply with relevant legislation.
By engaging the services of Stonegate Legal, your business can benefit from the peace of mind that comes with knowing that you have the necessary legal documentation in place to protect your interests.
Credit Applications
Credit Application Process
Knowing your customer is of utmost importance. If your customer is an individual or a sole trader, it is recommended to conduct an ABN search to verify the provided details and confirm the ABN's active status.
In the case of a business name, it is advised to perform a business name search to reveal the legal entity behind the business, which could be a company.
If your customer is a company, then an ASIC search should be carried out to obtain a current or historical extract, which will show the directors, company secretary, shareholders, and officeholders' addresses.
After identifying the right entity, several reporting agencies can offer credit reports that reveal any payment defaults and legal measures taken to recover outstanding debts. It is advisable to conduct credit checks on the directors of a company as well.
It is a typical practice to request trade references. Inquiring about two (2) or three (3) trade references from the customer can provide valuable insight into their past behaviour as a trade debtor. It is a reliable method to assess their creditworthiness.
It is highly recommended to conduct additional searches in addition to the one mentioned earlier. A basic Google search can yield valuable information, and using quotation marks around the customer's name followed by a relevant keyword can improve the search results. In case the customer is a company, obtaining a recent extract from ASIC can provide significant insights about the company.
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Establishing a Credit Contract
Stonegate Legal can assist in drafting a balanced credit contract that safeguards the rights of the creditor. Our experienced lawyers can provide guidance on which clauses should be included in the credit contract to ensure its fairness and protect the creditor.
We will work with you to create a tailored credit contract that meets your business needs while complying with relevant legislation.
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In a credit contract, it is crucial to provide a clear explanation of the consequences of default and breach. Failure to comply with payment terms may be considered a breach, while default may occur seven days after the notice of breach is sent. It is imperative to accurately define these terms and other related concepts.
When drafting a credit agreement, it is essential to clearly outline the repercussions of failing to meet payment obligations, as this could be classified as a breach of contract.
Additionally, a default may be declared after the lapse of seven days following the delivery of a notice of breach. It is vital to accurately define these terms and other associated concepts.
When dealing with a customer who is a company, it is necessary to request personal or director's guarantees. This is because although a company may face insolvency, its directors could still possess enough funds to fulfil payment obligations.
Thus, it is crucial to have the directors personally assure the payment obligations of the company to ensure that if the company fails to pay the debt, the recovery can still be made from the directors directly.
If a contract does not specify or if a court does not award legal costs at the conclusion of a trial, a debtor is not legally required to pay for the expenses incurred in recovering a debt.
To recover as much of the legal fees as possible, a contract that explicitly permits the inclusion of legal and debt collection costs in the total debt amount is a smart option.
This provision also serves as a strong motivator for the debtor to pay their dues promptly, as they may face the burden of substantial legal fees on top of their debt.
Incorporating a default interest rate for all unpaid amounts is crucial when drafting a credit agreement. It enables the creditor to charge a higher interest rate on overdue payments.
However, it's essential to be cautious while drafting this clause to ensure it isn't considered a penalty and removed from the contract.
