A Robust Credit Application Can Be Helpful In Litigation
The initial reason for having your customer fill out a Credit Application is to gather enough information to help you evaluate credit worthiness. Simple enough. But did you know, that in the event that you find yourself in the unfortunate position to pursue litigation, certain aspects of the Cred App could be especially important?
Being prepared for legal issues before they occur means thinking ahead to anticipate possible arguments. For this reason, we advise our clients make sure the credit application is dated.
While including the date is not a legal ‘must’, the fact is, you don’t need to open a door for argument with a customer about when your terms and conditions began. This could come into play if the credit application is filled out after a lot of orders have already been placed, for instance.
It’s also a good idea to make sure the signer on a personal guarantee does NOT include a title. Including a title will only place a big question mark as to whether the person signed as an individual or as representative of the corporation. The Judge will make the final call and, of course, it could be made against your interest.
If a spouse is to be held responsible for the guarantor, then he or she must also sign off on the guaranty. If not, any property that is in the spouse’s name will not be subject to seizure.
The hope is that you’ll never face legal issues with a customer. But if you’ll prepare in advance, you’ll be in a better position to come out on top.