Collection Policy of Receivables

COLLECTION POLICY OF RECEIVABLES

1. DOCUMENT PREAMBLE & RECITALS

THIS COLLECTION POLICY OF RECEIVABLES (hereinafter the "Agreement" or "Policy") is entered into and made effective as of [Effective Date] (the "Effective Date"), by and between:

PARTIES:

1. [Company Name], a [State/Country of Incorporation] [Corporation/LLC/Partnership], having its principal place of business at [Company Address] (hereinafter referred to as the "Creditor"); and
2. [Client/Customer/Debtor Name], a [State/Country of Incorporation] [Corporation/LLC/Partnership/Individual], having its principal place of business or residence at [Address] (hereinafter referred to as the "Debtor").

RECITALS: WHEREAS, the Creditor provides goods, services, and/or credit facilities to the Debtor in the ordinary course of business; WHEREAS, the Debtor desires to purchase goods and/or services from time to time on credit terms, or currently maintains an outstanding financial balance owed to the Creditor; WHEREAS, the Parties intend by this Agreement to establish a binding, comprehensive, and legally enforceable protocol governing the billing, payment terms, delinquency thresholds, collection procedures, default mechanisms, and legal remedies associated with all Accounts Receivable generated between them; and WHEREAS, the Parties acknowledge that this Policy constitutes an integral part of all commercial transactions, invoices, and credit extensions executed between them;

NOW, THEREFORE, in consideration of the mutual covenants, promises, and conditions set forth herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:

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2. OPERATIONAL DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings ascribed below, and such definitions shall be equally applicable to both the singular and plural forms of the terms defined:

1. "Account" or "Accounts Receivable" means any and all open-book accounts, invoices, notes, debits, or monetary obligations owed by the Debtor to the Creditor arising from the sale or lease of goods, provision of services, or the extension of commercial credit.
2. "Business Day" means any calendar day other than a Saturday, Sunday, or a statutory legal holiday observed in the jurisdiction of [Jurisdiction].
3. "Credit Limit" means the maximum aggregate monetary amount of unsecured credit extended by the Creditor to the Debtor at any given time, as established in writing by the Creditor pursuant to Section 3.1.
4. "Default" means the failure of the Debtor to perform any obligation under this Agreement, including specifically the failure to remit payment for any Invoice upon or prior to the expiration of the Payment Due Date.
5. "Grace Period" means the designated calendar period immediately following the Payment Due Date during which payment may be remitted without the imposition of late fees, subject to the terms of Section 3.2.
6. "Invoice" means a written or electronic itemized billing statement issued by the Creditor to the Debtor detailing goods sold, services rendered, or fees assessed, specifying the monetary sum due and the Payment Due Date.
7. "Late Fee" means the administrative and financial penalty assessed against the Debtor for any past-due balance, calculated in accordance with Section 3.3.
8. "Net Terms" means the agreed-upon number of calendar days between the date of an Invoice and the date full payment is strictly due, specifically designated as Net [e.g., 30] Days.
9. "Payment Due Date" means the exact calendar date by which cleared funds must be received by the Creditor, calculated as the Invoice date plus the applicable Net Terms.
10. "Security Interest" means any lien, encumbrance, mortgage, pledge, or collateral security interest granted by the Debtor to the Creditor pursuant to Section 3.6 to secure the payment and performance of all Accounts.

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3. SUBSTANTIVE TERMS & OBLIGATIONS

3.1 Credit Extension and Credit Limits

1. The Creditor shall evaluate the Debtor's creditworthiness prior to extending open-account terms. Upon approval, the Creditor shall establish a maximum Credit Limit of [Dollar Amount].
2. The Creditor reserves the absolute, unilateral right to reduce, suspend, or revoke the Debtor's Credit Limit at any time upon written notice, based upon a deterioration of the Debtor’s financial condition, payment history, or macroeconomic factors.
3. Any order or request for goods or services that causes the aggregate outstanding balance of the Debtor to exceed the established Credit Limit may be withheld, delayed, or rejected by the Creditor without liability until such time as the excess balance is fully paid or secured to the Creditor's satisfaction.

3.2 Invoicing and Payment Performance Metrics

1. The Creditor shall issue an Invoice for all delivered goods, completed services, or accrued fees. Invoices shall be transmitted electronically to [Billing Email Address] or via physical mail to the Debtor’s address of record.
2. Payment terms are strictly Net [30] days from the date of the Invoice, unless otherwise expressly agreed in a separate signed commercial addendum.
3. All payments must be remitted in United States Dollars (USD) via Electronic Funds Transfer (ACH/Wire), corporate check, or approved digital payment gateway, referencing the applicable Invoice number(s). Cash payments are strictly prohibited.
4. Payment shall be deemed received only when unencumbered, cleared funds are deposited into the designated bank account of the Creditor.

3.3 Delinquency and Late Payment Penalties

1. Accounts remaining unpaid after the close of business on the Payment Due Date shall be classified as delinquent.
2. Delinquent accounts shall be subject to a monthly Late Fee equal to the lesser of [e.g., 1.5%] per month ([18%] per annum) or the maximum lawful rate permitted under applicable usury and commercial laws of [Jurisdiction], calculated on the total past-due balance from the Payment Due Date until the date of actual receipt of full payment.
3. Assessment of Late Fees does not constitute a waiver of the Creditor's right to declare a Default or pursue immediate legal remedies.

3.4 Representations and Warranties

1. Debtor Representations: The Debtor represents and warrants that:
   • It is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation.
   • The execution and performance of this Agreement have been duly authorized by all necessary corporate or organizational action.
   • The financial statements and credit applications provided to the Creditor are true, accurate, and correct in all material respects.
2. Creditor Representations: The Creditor represents and warrants that it possesses the legal right, power, and authority to sell the goods, render the services, and enforce the collection terms set forth herein.

3.5 Disputed Invoices

1. If the Debtor disputes any portion of an Invoice in good faith, the Debtor shall provide detailed written notice of the dispute to the Creditor within [10] calendar days of receipt of the Invoice.
2. The notice must specify the exact dollar amount in dispute and the comprehensive factual and legal basis for the dispute with supporting documentation.
3. The Debtor shall remit payment for all undisputed portions of the Invoice on or before the Payment Due Date. Failure to provide timely written notice of a dispute pursuant to this Section 3.5 shall constitute an irrevocable waiver of the Debtor’s right to dispute the subject Invoice.

3.6 Collateral and Security Interest

1. To secure the prompt payment, performance, and observance of all present and future Accounts and obligations under this Agreement, the Debtor hereby grants to the Creditor a continuing, first-priority security interest in all inventory, equipment, accounts receivable, general intangibles, and proceeds thereof, whether now owned or hereafter acquired (collectively, the "Collateral").
2. The Debtor authorizes the Creditor to file Uniform Commercial Code (UCC) financing statements, or international equivalents, in all applicable jurisdictions to perfect the security interest granted herein.

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4. DEFAULT, TERMINATION, AND REMEDIES

4.1 Events of Default

The occurrence of any one or more of the following events shall constitute an immediate and material "Event of Default" under this Agreement:

1. Failure of the Debtor to pay any Invoice, Late Fee, or other monetary obligation within [5] calendar days following the Payment Due Date.
2. Breach by the Debtor of any non-monetary covenant, representation, or warranty contained in this Agreement or any related commercial agreement.
3. Insolvency of the Debtor, cessation of the Debtor’s business operations, assignment for the benefit of creditors, appointment of a receiver, trustee, or liquidator for all or substantially all of the Debtor's assets.
4. Commencement of any voluntary or involuntary case under the United States Bankruptcy Code or any foreign insolvency framework by or against the Debtor.
5. Any attachment, execution, or levy is levied upon a material portion of the Debtor's assets or Collateral.

4.2 Notice of Default and Cure Period

1. Upon the occurrence of an Event of Default (other than payment defaults, which shall require only notice without cure, or insolvency events, which shall be immediate), the Creditor shall provide written notice of default to the Debtor.
2. The Debtor shall have a period of thirty (30) business days from the receipt of such notice to fully cure the specified default (the "Cure Period").
3. If the default is monetary, cure requires the complete remittance of all past-due principal, accrued Late Fees, and enforcement costs. If the default is non-monetary, cure requires complete remediation to the reasonable satisfaction of the Creditor.

4.3 Creditor Remedies Upon Default

Upon the occurrence of an Event of Default and the expiration of any applicable Cure Period without successful remediation, the Creditor may, at its sole discretion and without further notice, exercise any or all of the following cumulative legal and equitable remedies:

1. Acceleration of Debt: Declare the entire unpaid balance of all open Accounts, notes, and outstanding Invoices immediately due and payable in full, without presentment, demand, protest, or further notice of any kind.
2. Suspension of Performance: Immediately suspend the delivery of any further goods, performance of services, or extension of credit under this or any other agreement between the Parties.
3. Enforcement of Security Interest: Exercise all rights and remedies of a secured party under the Uniform Commercial Code, including the right to seize, repossess, and sell the Collateral.
4. Collection and Legal Costs: Recover from the Debtor all costs and expenses incurred by the Creditor in enforcing its rights hereunder, including reasonable attorneys' fees, court costs, arbitration expenses, filing fees, and third-party collection agency commissions (calculated up to [35%] of the principal balance or the maximum percentage permitted by law).
5. Set-off: Exercise a right of set-off against any funds, credits, or property of the Debtor currently held by or in the possession of the Creditor.

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5. BOILERPLATE LEGAL PROVISIONS

5.1 Severability

If any provision, clause, or section of this Agreement is held to be invalid, illegal, or unenforceable by a court or tribunal of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid and enforceable. If modification is impossible, the offending provision shall be deemed excised, and the remaining provisions of this Agreement shall remain in full force and effect, operating as if the invalid provision had never been drafted.

5.2 Entire Agreement

This Agreement, together with any referenced credit applications, Invoices, and exhibits, constitutes the final, complete, and exclusive statement of the agreement between the Parties pertaining to the subject matter hereof. This Agreement supersedes all prior and contemporaneous negotiations, understandings, representations, warranties, and agreements, whether written or oral. No modification, amendment, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument explicitly referencing this Agreement and signed by the authorized representatives of both Parties.

5.3 Force Majeure

Neither Party shall be held liable for any failure or delay in the performance of its non-monetary obligations under this Agreement if such failure arises out of acts of God, war, terrorism, civil unrest, natural disasters, epidemics, pandemics, government sanctions, strikes, utility failures, or other catastrophic events beyond the reasonable control of the affected Party (a "Force Majeure Event"). Expressly excluded from this provision is any payment obligation: lack of funds, economic hardship, or currency fluctuations shall under no circumstances excuse the Debtor's obligation to timely remit payment for Accounts Receivable.

5.4 Governing Law

This Agreement, and all claims, disputes, or causes of action (whether in contract, tort, or statute) arising out of, connected with, or relating to this Agreement, shall be governed by, construed, and enforced in accordance with the internal substantive laws of the State of [Jurisdiction], without regard to its conflict of laws principles. The United Nations Convention on Contracts for the International Sale of Goods shall not apply.

5.5 Dispute Resolution

1. Negotiation: In the event of any dispute, controversy, or claim arising out of or relating to this Agreement, the designated senior executives of both Parties shall attempt in good faith to resolve the matter through direct business negotiation within [15] business days of receipt of written notice of the dispute.
2. Arbitration / Litigation: If the dispute is not resolved via negotiation, the Parties agree that any legal action, suit, or proceeding arising out of or relating to this Agreement shall be submitted to binding arbitration administered by the [American Arbitration Association (AAA) / JAMS] in accordance with its commercial arbitration rules. The place of arbitration shall be [City, State], and the proceedings shall be conducted in the English language before a single neutral arbitrator. The award rendered by the arbitrator shall be final and binding, and judgment upon the award may be entered in any court having jurisdiction thereof.
3. [Alternative Court Clause]: Alternatively, if both Parties mutually agree in writing, disputes may be submitted to the exclusive jurisdiction of the state and federal courts located within [County, State], and each Party hereby irrevocably submits to the personal jurisdiction of such courts.

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6. FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties hereto have caused this comprehensive Collection Policy of Receivables to be duly executed by their respective duly authorized officers, agents, or representatives, as of the Effective Date first written above. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Electronic signatures and digital transmissions shall carry the same legal force and effect as original wet-ink signatures.

FOR THE CREDITOR:

[Company Name]

Signature: ____________________________________________________

Name: [Signatory Name]

Title: [Signatory Title]

Date: [Date]

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FOR THE DEBTOR:

[Client/Customer/Debtor Name]

Signature: ____________________________________________________

Name: [Signatory Name]

Title: [Signatory Title]

Date: [Date]