Legal Question in Business Law in California
If a customer owes a previous outstanding receivable, can you insist they pay a portion of that receivable before shipping any future orders and to prepay the full amount of those future orders as well?
4 Answers from Attorneys
Of course. Insist on it!
Legally, you can do it; you should weigh whether it makes business sense. Setting up credit policies for a business is a balancing act between keeping good customers happy and buying from you, on the one hand, versus keeping credit losses to an acceptably low level, on the other.
As a Franchise Attorney I basically agree with the other attorney answers; but one factor was not considered. Is the outstanding receivable overdue? If it's not, although it may be legal to change or vary your shipping terms, this will likely upset your customer. If the receivable is overdue, then the business decision is easier - especially in this economy where money is very tight. Consult with a good business or franchise attorney in your area for specific advice.
Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.
Franchise Foundations, a Professional Corporation
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