Be careful of granting vague credit terms.
31st October 2016 by Rob Kelly
Businesses are often under commercial pressure to grant credit to important clients but the judgment in Trafigura PTE Ltd v Taci Oil International Trading and Supply Company SH.A  EWHC 3730 (Comm) illustrates how easy it is for such debts to get out of control. A commodities trading company had agreed to defer payment of part of a favoured customer’s bills but ended up being owed almost $5.3 million.
The claimant regularly supplied large volumes of gasoil and gasoline to the defendant Albanian client and to assist with the defendant’s expansion plans, the claimant was persuaded to accept 50% payment in advance of delivery and 50% within 90 days of delivery. In practice, this arrangement enabled the defendant to obtain twice the value of cargo that it actually paid for. The defendant took extensive advantage of the deferred payment terms and a substantial debt quickly developed. The defendant admitted that sums were due, and promised to make repayments but only a few were ever made.
The claimant eventually issued debt recovery proceedings. After putting in a defence to the claim, the defendant played no further part in the case and failed to respond to any correspondence. In the circumstances, the court found the amount of the debt proved and entered judgment in favour of the claimant for $5,296,232, including interest.
Comment: In a rapidly changing economic climate, one thing that will always have a negative effect on businesses is when a client, customer or contractor fails to pay for goods or a service. We have an experienced team to provide a low cost, reliable and effective debt collection solution.
If you would like further information please contact Rob Kelly.
This article provides information and comments on legal issues and developments of interest. The contents of this article do not constitute legal advice, is not a comprehensive treatment of the subject matter covered, and should not be relied on as such. Legal advice should be sought about your specific circumstances before taking any action with respect to the matters discussed.