A signed credit application doubles as your Master Contract with your customers. Here are a few clauses you may want to include in your terms and conditions to protect the company:
1. Jurisdiction:
“The undersigned hereby agrees and consents to the exclusive jurisdiction of the county of [your county], [your state], relative to any claims arising out of or relative to this agreement. The undersigned hereby waives a trial by jury for any and all disputes.”
The legal default would be for the buyer’s local jurisdiction. This clause would protect you from having to travel to the debtor’s location for any court proceedings.
2. Late Fees:
“Payment is due net 30 unless otherwise stated. Past due invoices are subject to an interest charge at the rate of 1.5% per month to the extent permitted by applicable law, including post-judgment.”
While late fees are not claim eligible in a credit insurance policy, collection agencies can pursue them as a legitimate debt.
3. Financials:
“Please attach a copy of annual reports or financial statements for the past two fiscal years.”
Cannot hurt to ask!
4. Disputes:
“The undersigned hereby agrees to notify [Your company legal name] of any disputed invoices within 30 days of date of invoice.”
5. Bounced Checks:
“The undersigned shall pay a $40 fee for all checks returned for insufficient funds or any other reason.”
6. Collection Expense Recovery:
“Should collection be required, the undersigned agrees to pay reasonable attorneys’ fees plus all reasonable expenses incurred by the Seller in enforcing this agreement.”
7. Change in Ownership:
“The undersigned agrees to notify [Your company legal name] by certified mail of any pending change of ownership of the Customer and further agrees to be liable for all purchases should the undersigned fail to comply with said notification.”
8. Disclosure Permission:
“The undersigned authorizes its bank and trade creditors to disclose all information requested herein.”
9. Personal Guarantee:
A separate document or last page to a credit application. Obviously use discretion, but small businesses are often accustomed to having to sign PGs. Some may want to leverage their strong personal credit as a means to secure credit for their business. Having this additional layer of protection can be critical in maximizing chances of recovery.
10. A Binding Signature:
And of course, ensure you have a binding signature from the owner or officer of the company for any of the above to be enforceable.
With a proper and sophisticated online credit application, these clauses can be neatly tucked away in a “click here to accept our terms and conditions” with a hyperlink to the terms, in a manner that is still legally enforceable.
Finally, it is good practice to consult a contract attorney. Each industry and state have their nuances and there may be additional / different clauses you want to include.