Representing Businesses and Individuals in Chicago and Northern Illinois

Document Retention: It’s Important!

A credit agreement is a contract. As such, you should retain the entire, original signed contract in your files, not just the signature page.

I have noticed that some companies retain only the signature page of a credit agreement in their files. Often what happens is that a customer will obtain a credit agreement application at the supplier’s store or warehouse. They will take it back to their office, sign it and fax it back to the supplier. Although the credit agreement itself may be 4 pages in length, the customer tends not to fax the entire agreement. Instead they just fax (or mail or email) back the signature page. The supplier then puts the signature page in their customer file, opens an account, and commerce begins.

The problem comes on the day that the customer fails to pay for materials they have ordered and the matter gets sent to the supplier’s attorney for collection. The supplier sends the file to the attorney. The attorney looks at the signature page of the credit agreement and asks, “Where’s the rest of the agreement? This is just the signature page.” Hopefully, the supplier still has a copy of the full original credit agreement on file. But this is not always the case. A company can get sold and so its credit agreements might not get transferred over. Also, a company might develop a new credit agreement form and no longer have the old form around.

It can be difficult, and sometimes impossible, to sue on a credit agreement if the only document you have is an old, blurry, faxed, signature page of the original agreement. The signature page itself probably does not contain all the terms of the credit agreement contract. This could include provisions for attorney fees and interest on late payments.

Without a single complete document all in one place, you will have to explain to the judge the circumstances about why you do not have the entire original document and you will have to explain what the terms of the agreement should be. Such explanations tend to complicate your case, and a complicated case takes longer to prove and will be more expensive to litigate.

In court, you want to make things as simple as possible. You want to be able to present the court with the entire agreement that was signed by the customer in its original form. It is a “Best Practice”, therefore, to demand that your customer return a complete and signed document to you when applying for credit and to keep the complete, original signed document in your files. Hopefully, you’ll never have to sue to enforce it. But if you do, you’ll be ready.