Creditors’ Rights 12
Q: It has been many years since we reviewed the standard contracts that our customers sign. How often should we do this?
A: We recommend that you engage a creditors’ rights law firm to perform a thorough review of all of your agreements. Some of the key issues that your attorney may be looking for include payment terms and interest on late payments. Other items to be reviewed are whether your contracts contain an appropriate disclaimer of warranties, or limitation of remedies against you by your customer. Also, you may want to have your attorney investigate whether some of your more “credit risky” customers have changed their legal composition (i.e., incorporated their business that previously had been a partnership or sole proprietorship). We have found that some companies, by not focusing on and enforcing the terms of their contracts, and not keeping up to date on their customers’ activities, actually give the impression that it is “OK” to be paid late, or that they are not vigilant about their accounts receivable. It is important to reflect a culture that demonstrates that your contract terms are non-flexible and enforceable, and that you closely monitor your accounts receivable.
