Why Your Contract Failed Before Your Invoice Did
This video examines how contracts built around closing a sale can leave businesses exposed when international customers fail to pay. It covers four areas to address before the next agreement: jurisdiction, late-payment interest, ownership of goods, and currency fluctuations.
Key takeaways
- Consider where the debtor and its assets are located when choosing courts, rather than assuming a home-court judgment will be straightforward to enforce abroad.
- Write clear late-payment interest provisions into the agreement instead of relying solely on a payment deadline or statutory rights.
- For physical goods, use retention-of-title provisions drafted for the debtor’s jurisdiction to preserve ownership until payment.
- Define the invoicing currency, exchange-rate reference, and an adjustment mechanism for movements outside an agreed range.
- Apply these protections to future agreements; they cannot retroactively repair the contract behind an existing overdue invoice.
What this video covers
This video explains why collection problems can begin with the agreement signed at the start of a commercial relationship. Terms chosen to secure a sale, particularly domestic boilerplate reused for international business, may offer inadequate protection once a customer stops cooperating. The first lesson concerns jurisdiction. Obtaining a judgment at home does not necessarily make recovery straightforward when the debtor’s assets are elsewhere. Recognition and enforcement abroad can require additional proceedings and local legal support. The video therefore recommends considering the debtor’s courts or a neutral jurisdiction with effective reciprocal enforcement arrangements. It also examines payment terms. A deadline alone provides less leverage than an agreement that expressly sets out late-payment interest. For businesses supplying physical goods, retention of title offers another protection: ownership remains with the seller until payment, provided the provision is enforceable under the relevant jurisdiction’s rules. Currency exposure is the fourth issue. Specifying the payment currency, a reference exchange rate, and an agreed adjustment mechanism can help keep exchange-rate movements from becoming payment disputes. The closing lesson is forward-looking: an existing receivable remains subject to the agreement already signed. Reviewing these four areas before future sales can strengthen the creditor’s recovery position.
