Covid-19 and credit management (part 3): negotiation strategies and credit recovery

After having analyzed, in previous articles on this blog, the main issues related to payments to be obtained from clients, it is useful to underline how the best solution to deal with credit recovery is to start a negotiation phase with the other party.

In this way, the creditor can benefit from a whole host of advantages, as:

– obtain, in writing, an express recognition of the debt (that will facilitate the issuing of a possible injunction order, immediately enforceable in the case of non-compliance with the agreement);

– freely regulate every aspect of the agreement (also by exceeding the legal discipline, except for mandatory rules);

– reduce the risk of objections (during a legal proceeding in front of a court) relating to quality of delivered goods;

– obtain a credit’s proof that is possibly invoked against third parties in case of insolvency proceeding;

– plan clear timings for payments;

– agree on possible default interest (following Legislative Decree no. 192 of 2012);

– set received charging payments;

– obtain guarantees on the observance of terms for payment;

– introduce the termination of the agreement’s idea or the elapse of the acceleration clause;

– exclude the novation effect of the agreement.

Last, but not least, another aspect regards the possibility to continue the business relationship with a client temporarily in difficulty, by a negotiation strategy efficiently carried out.

In this case, it is likely that this health emergency could worse both terms and conditions of payment, not only at a national level, but also at an international one.

All these provisions then have to be coordinated with the bankruptcy reform – which is intended to be put into force by September 2021 (and postponed because of the governmental emergency provisions on Covid-19) – and with new obligations, instruments and procedures provided by the new Code on Company Crisis and Insolvency (corporate control bodies, proper organizational structures, crisis signs, reporting obligations, alert procedures, OCRI (i.e. crisis settlement bodies), etc).

Considering this scenario, suppliers and companies in general will operate in a position of initial disadvantage towards subjects who can rely on a package of complete information on the health status of their clients (for example Banks and Insurances) and towards subjects (as the Italian Revenue Agency, charging Authorities and social security Authorities: identified as public and qualified Creditors) which must respect the reporting obligation.

Essentially, the risk is to cause adverse effects on national and international trade: from Covid-19 spread, to the issuing of Authorities’ restrictive measures, from the non-payment to the missing collection of receivables, culminating in companies crisis or insolvency procedures against companies which will not survive these events.

To conclude, for companies which operate on national and international markets, it will be essential to deal with the risk linked to the credit, by:

– drafting contracts which are clear, safe and complete of all necessary measures,

– reviewing agreements, where possible, together with the partner, and

– last, when a judicial dispute occurs, adopting a negotial strategy which can mitigate adverse effects, without underestimating the advantages mentioned above.

Luca Davini
Avvocato in Milan and Turin

#internationalcreditrecovery #internationalcontracts #internationaldispute #covid19 #doingsafebusiness

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Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli


I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?


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