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Managing sales risk in a credit squeeze

01 August 2008

When times are tough you need to know that you will be paid for the products or services you supply.

If the worst happens and your customer cannot pay, you need the reassurance of enforceable retention of title provisions to recover your goods, and, if possible, parent company guarantees if those are available. A simple review of the terms and conditions you use is a great starting point. The ten point health check we have devised will enable you to test your current exposure to sales risk.

Who are you contracting with? red information
Whose terms are incorporated and govern the contract? red information
Is the Buyer credit worthy and what credit terms are being agreed? red information
What assurances are you giving regarding the specification of the products/product description/and provisions regarding product quality? blue information
What is the position regarding time for delivery? Can the Buyer cancel if you are late? blue information
Title and Risk - Title should be retained until payment is received and risk should pass on passing of possession. blue information
Price - for how long is any price quoted fixed? red information
What are the rights of the Buyer if the Product fails to comply - in particular does the Buyer receive any indemnity from the Supplier? blue information
Have you included provisions including or restricting your liability to the extent the law allows? blue information
Is the contract where appropriate governed by English law and subject to the jurisdiction of the English Courts? red information

red information Denotes serious potential exposure - lack of certainty in these areas could result in an inability to recover money otherwise due.

blue information Denotes an area of concern where you should consider tightening your contracts to avoid potential problems.

Are any of the issues in this article giving you a headache? If so, we want to know

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Andrew Pickin

Partner
T: 08700 86 5032
I: +44 (0)115 906 5032
E: andrew.pickin@shoosmiths.co.uk