Valenti Lawyers SME Business – Am I ‘unsecure’?

Over the past few months we have been speaking extensively with business owners about their business needs and how we can assist our Perth SME market. Which lead us to develop the Valenti Lawyers SME Essential Packages.

Throughout our discussions, we repeatedly heard the same issue – “We wish we invested in better legal documents instead of paying more money to dispute legal proceedings”.

One clear example we have seen of this in practice was where a business that supplied goods to customers on credit terms had used terms and conditions it has ‘borrowed’ or ‘copied’ from a competitor or similar business. Because of how the competitor had structure their business, those terms and conditions did not contain any retention of title provisions, any security for outstanding payments or the provision of payment of any interest for overdue amounts.

When a customer of the business failed to pay its significant outstanding account, the business had limited options for recovering the debt. It was not able to retake the goods, it was not entitled to the sale proceeds the customer had received from on-selling the goods, and the business couldn’t charge or seek to recover any interest (above the statutory amount).

Ultimately, the customer became insolvent and liquidators were appointed. The business had to prove its debt in the liquidation and was ultimately not able to recover the full amount of its debt, as the assets of the customer were shared amongst all the customer’s unsecured creditors.

The outcome may have been vastly different if the business had adopted terms and conditions that were appropriate for its structure and operations. While the competitor’s conditions may have been prepared by another lawyer, they were designed to work with the competitor’s purchase orders and  credit terms, which were different to those of the business.

If the business had sought legal advice, and used sale conditions that were appropriate for that business, it would have had a far greater chance of either retaking the goods, or securing payment of the debt.

 

Nick Steinsvaag