Recovery starts at the contract stage. These clauses make an overdue invoice far easier to enforce.
1. A credit period with a defined start
State whether the period runs from invoice date, delivery, or acceptance, and define acceptance. Most disputes about lateness are really disputes about when the clock started.
2. Interest on delayed payment
Fix the rate and the compounding interval. Suppliers registered under the MSMED Act should also record the statutory entitlement to compound interest at three times the RBI bank rate, which is a strong bargaining position.
3. Deemed acceptance of invoices
Any objection to an invoice or delivery must be raised in writing within a stated number of days, failing which the invoice stands accepted. This clause is what defeats a manufactured 'pre-existing dispute' later.
4. Security: cheques, guarantees, retention of title
Undated security cheques, a personal guarantee from the promoter, and retention of title until full payment each turn an unsecured receivable into something enforceable in a different, faster forum.
5. Jurisdiction and dispute resolution
Name your own city's courts, and choose deliberately between arbitration and litigation. An arbitration clause with a seat, a language and an appointment mechanism saves months at the outset of a dispute.
This note is general information on Indian law and not legal advice on your matter. For advice on a specific account, speak with us at +91 73300 22222.