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The contracting phase is essential to prevent the risk of overdue customers. It allows to establish with the client the legal documents that will prove the terms of the agreement in the event of a dispute later on.

A contract is not necessarily written from a legal point of view but it is clear that the evidence of its existence is more easily made if this is the case.

It can be tedious to establish a contract with each of your customers, so ask them to sign your sales conditions and your retention of property clause to ensure your main interests are covered.

Property reserve

This clause is to be inserted in your sales conditions and in your sales contracts. To be fully valid, it must be signed by your client being followed by the phrase "read and approved ".

It stipulates that the goods delivered are still your property until they are fully paid.

In case of unpaid invoices you can collect the material even if your client is in bankruptcy proceedings. You have three months to perform your claim with the court administrator.
It is recommended to do it as quickly as possible as your client could sell the material, then you won’t be able to collect it.

The goods must be readily identifiable and found in the same form as during the initial sale. This clause can not work if your material has been processed, sold or used by your client.

Feel free to integrate massively this clause in your sales documents even if it is sometimes impossible to use it. It costs nothing and can help you to recover your debts (even it is not in cash) in the event of failure of your client.

The forfeiture of the term

This clause is useful when the buyer receives a regular payment (monthly payments during X years, payments done at the different stages of the case ... etc.).
Any payment incident occurring on one of these due dates make all the debts immediately owed. It is to be included in your sales contracts.

The addition of this clause in business contracts has two advantages:
  • it shows your customer with your requirement to be paid in accordance with expiration dates of your bills,
  • it offers an effective remedy to get payment of your total outstanding debt from the first unpaid invoice.
  • it is very adapted to medium / long term investment cases.

Suspension and termination clauses

These clauses are very important on medium and long term contracts as your company commits to achieve a job and deliveries during several years.

If this clauses are not included in the contract, you will be obliged to do what is scheduled in the contract even if you are not paid by your customer. That's why it is a must to include them in order to give you the right to stop deliveries in case of overdue invoices.
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Last comments
S. 08-02-2023
How does these above clauses are valid on consumable business?