WARNING SIGNS OF DEBT
The obligated party’s business execution and financial capacity to pay shall inevitably face some impacts due to the complicated developments of the Covid-19 pandemic. Therefore, in order to limit and prevent the risks that may occur for due debts, you should pay attention to several elements in the process of establishing and making the contract, as follows:
1. Before establishing a transaction
You need to thoroughly research information about your partners by collecting relevant information about their operations and financial capacity, especially for partners with business executions directly affected by the social distancing due to the pandemic according to the Prime Minister’s Directive. Because these are business entities that are likely to be greatly affected and suffer heavy losses from the suspension of business executions due to the pandemic and the possibility of debt arising is easily recognized. From there, you could initially identify and classify the partners that are capable of ensuring the fulfillment of payment obligations when establishing a transaction, thereby having a basis for entering into a contract as well as conducting the drafting of necessary terms for the Contract.
Besides, if it is the first time the parties cooperate, you need to review information related to their business execution in the last six months. Accordingly, if these partners change suppliers because the previous supplier no longer accepts debts, you should be careful when entering a Contract for them.
2. During the transaction
When the two parties sign the Contract, you need to learn your partner’s legal representative so that the Contract can meet the requirements of the authority. Accordingly, you must request to see the Power of Attorney if the legal representative authorizes another person to sign the Contract on their behalf.
Moreover, in order to ensure the solvency of the partner, in some necessary cases, you could ask the partner to make a deposit, supplement the terms of payment guarantee as well as the provision on temporarily terminate providing goods when the partner has not yet completed the payment of due debts. The payment process needs to be done through bank transfer for the convenience of the parties because when the Bank performs the function of managing and storing documents and assisting in extracting documents, it is evidence in case of a dispute.
3. Making the transaction
During making the Contract, you should not only strictly comply with the Contract but also closely monitor the partner’s compliance with the Contract. In addition, the Parties need to sign and seal every receipt, debt reconciliation minutes, and official letter to ensure legal validity and be a specific source of evidence when there is a dispute.
4. Debt occurs
Upon the expiry of the payment term under the Contract, but your partner fails to make the payment obligation, you need to send a written to request payment according to the specified and reasonable time limit as soon as possible. In addition, the advice of receipts from the documents referring to the debt which are sent to your partners should be collected in order to track the situation of the documents, and they are also the basis of reply from your partners;
Regarding the reply related to the debt, you need to request your partner to do so in written form and indicate the payment commitment and payment schedule. Moreover, to better ensure their legitimate rights and interests, you need to monitor and remind your partner about the payment deadline according to the committed schedule and synthesize and prepare necessary documents for later negotiation and settlement of disputes in Court.
Hopefully, the information will support your business executions in the future.
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