This feature originally appeared in the August 25th edition of the Pittsburgh Business Times.
Q: What are some provisions I should include in my credit agreement in order to protect my rights against a defaulting credit customer?
Advice: A credit agreement provides the terms and conditions of a credit relationship and sets the ground rules for any future conflicts. I recommend that you include:
- Payment Terms – Here are the due dates, rates, discounts, late fees, percentages and payment options (the heart of a good, working credit relationship).
- Interest – When are late fees assessed? At what percentage rate? Unless creditors obtain a signature on an agreement, they may not be able to legally collect one.
- Waiver of Jury Trial – Credit criminals find wiggle room in asking for a costly jury trial. This provision waives the jury trial in the honeymoon phase of a relationship.
- Choice of Law Provision – Sellers usually understand the laws in their state (or know which states are favorable) and want them to apply in any dispute.
- Jurisdiction – Usually, a creditor wants disputes resolved close to their home, not the debtor’s.