Australian businesses are more and more being seen to engage a collection agency to recover a debt once a client has missed several payments. To put an expert in their field on the job is a beneficial way to save the creditor from wasting precious resources. Securing debts is a process that takes manpower, time and effort. Effective debt collection agencies will stay in constant communication with the debtors and allow the creditor to focus on their own business. In addition, a professional debt collection agency offers legal protection throughout the process and is qualified to use advanced tools and legal strategies to collect the receivables. The purpose of this blog series is to guide you through methods of recovering a debt and furthermore give an insight into debt collection and its complex insolvency law and practice.
To recover a debt, the essential document is a valid contract entered into with the business and its client. A contract is a legal binding between two or more parties and only enforceable by law if it contains several elements:
- an agreement has been reached between the parties
- consideration has been given by at least one of the parties
- the parties have legal capacity and intend the contract to be legally binding and
- ‘formalities’ (written or oral form of the contract) are complied with
Construction contracts will normally set out the main payment parameters of:
- the amount to be paid
- whether there are progress payments and if so, how they are to be calculated (valuation of work done, reaching a pre-agreed stage, etc.)
- who will determine the amount of the payment
- when the payment should be made
- whether retention money or other offsets can be withheld and
- how disputes will be managed
An agreement that lacks one or more of the elements listed above is not a valid contract.
Security of payment Clause
The security of payment refers to a clause designed to ensure there will be no significant delay in payment from the principal contractor. Thus the head contractor may insist that the contract includes for the principal to provide security for his payment obligations. This clause is particularly used in contracts where the principal is not a substantial company. Security may be provided by way of cash; alternatives are frequently bank guarantees or insurance bonds.
Our next blog in this series will discuss further methods of recovering debt after exhausting the contractual arrangements.
If you would like to learn more about the debt collection services we offer, contact us now. We have over 30 years of experience providing professional and discreet debt collection solutions for clients of all sizes and across all industries. With debt collection agencies in Sydney, Melbourne and Brisbane we have you covered.