PICB’s Credit Tip – Who’s Your Valentine

By Andrea Schlack, President PICB

Have you been victimized by a customer who suddenly sold its company while still owing you money? Were you left bereft, a profitless victim without recourse?

PICB’s Valentines Wish to You

William Shakespeare wrote “A rose by any other name would smell as sweet” which simply means that the names of things do not affect what they really are, therefore can using his observation better define certain credit terms to keep the money where it belongs?

Specifically, a Printer who defines payment expectations as a “Trust” and states specifically its rights and remedies over a Customer that is a Third-Party Trade reselling goods/services for price + profits may be able to hold such a non-paying Customer and its’ principals personally liable for the breach of that Trust without obtaining an actual personal guarantee.

Money deposited to a bank account whereby others have a fiduciary right to a portion of the proceeds is a ‘Trust’ – and a “Constructive Trust” is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its right of payment. In simple non-legal terms, invoices paid and deposited to your Customer’s bank account is a ‘trust’ and if the portion owed You is not paid the Courts may deem the non-payment as a violation of the Constructive Trust ordering the Customer and its principals to pay you.

When used for its intended purpose many may claim it to be improper, unenforceable or illegal. But, just like Shakespeare’s rose—

Suggested Constructive Trust language you may want to add to your credit agreement:

The proceeds of any sale made by [Customer] using [Creditor] product shall be deemed to be held in constructive trust for [Creditor] in such amount as would have been due to the [Creditor] to satisfy the sale price of the product used in the sale. To facilitate the future and ongoing sales of product from [Creditor] to [Customer], the principal(s) of [Customer] acknowledge this to be a personal debt of the principal(s) as well.” This Constructive Trust shall constitute an immediate lien upon the funds received by Customer from said end user for the product using Creditor’s goods and services. Said lien is in favor of Creditor and against Customer.

May it never be needed, but …..
may you benefit from it should it become necessary

Happy Valentine’s Day From the entire staff of PICB!
Andrea Schlack, President

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