The credit agreement is used differently and means different things to those involved in a commercial transaction.
To the vendor, the credit agreement is a way to gather information about a prospective customer. With this information, the vendor has a means of determining whether the customer is credit-worthy and can afford to pay a bill for materials provided on a credit basis.
To the customer, the credit agreement is used exclusively for the purpose of obtaining goods on a credit basis. The customer views the credit agreement as a necessary means to this end.
To the collection attorney, however, the credit agreement is used as the principal tool when it comes time to sue a customer who has failed or refused to pay and the means by which a judgment can be obtained.
Notice that there are subtle differences between how different parties use the credit agreement. Because of these differences, there are different requirements for each.
The vendor, for its part, may just want enough information so it can do a credit check on the applicant. The customer, for its part, only wants to provide the minimum amount of information necessary so that it can obtain an approval of its credit application.
For the collection attorney, however, virtually all of the information on the credit agreement can prove useful and often vital in the success of a collection action. A legible signature or written name of the person signing the credit application is important to assure that an authorized person has signed the contract. A physical address of the company is important so that the sheriff can effectuate service of summons. Banking information is important so that if a judgment is obtained, the attorney knows where funds are located for possible garnishment.
People often complain about the cost of litigation a collection action. But sometimes, the cost is directly related to the attorney’s need to collect the information that could otherwise have been gathered by the client had the credit agreement been fully and accurately completed.
Keep these perspectives in mind when processing a customer’s credit application.