Brisbane business law and commercial dispute specialists Results Legal share their insights on the important role credit agreements play in setting your business up for success.


We previously outlined the importance of internal governance agreements like shareholder agreements. 

Another crucial (but often overlooked) element in managing the risk in your business is having effective and favourable terms of trade, credit agreements or client agreements in place with customers.  

As the pandemic stretches on, knowing your customers and getting paid in business has arguably never been more important.   

A well-drafted, up-to-date, customised credit agreement, including a personal guarantee, is the single most effective tool available for businesses to mitigate risk, successfully resolve disputed claims, and ultimately secure payment from your customers. 

If your business offers credit to customers but does not have an up-to-date credit agreement in place, you should implement one as soon as possible. 

Prudent business owners should also have their credit agreements reviewed regularly to ensure that they are up to date with current laws and fit for purpose to give the business the maximum protection possible.   

What should be included in a credit agreement? 

Credit agreements are a valuable risk-management tool. They should limit the business’ liability, include robust security provisions that provide security for credit, as well as mechanisms that will assist your business in recovering debts. 

Such security provisions normally include: 

  1. A retention of title clause (which allows a creditor the ability to register their security interest in the goods they supply on the Personal Property Securities Register).  Many people are not aware that without this, title to the goods will be lost in the event of an insolvency even if you are not paid by your customer, which is unfair; and
  2. A security interest over the customer’s real and personal property (which enables a creditor to register a caveat or mortgage over a debtor’s real property and/or register a security interest over a customer’s personal property). 

Credit agreements should also contain (among other things): 

  1. A clear mechanism as to how and when a contract for the supply of goods or services is formed; 
  2. Provisions that set out when key events are to occur (such as when delivery is deemed to occur and when risk and title in the goods supplied is deemed to have passed); 
  3. A privacy statement (which provides the necessary consents for a creditor to access, hold, and disclose their customer’s personal and credit information, in order to comply with the business’s obligations under the Privacy Act 1988); 
  4. A personal guarantee to be provided by directors of companies with security from the directors;  
  5. A limitation of liability clause (to minimise your risk of exposure to unnecessary liability, including liability for consequential loss); and  
  6. A costs clause (which requires a customer to pay all your legal costs incurred in seeking to recover a debt).  This is very useful to call upon to ensure that recovery action to recover debts (even for smaller debts) are commercial.   

When was the last time your business had its credit agreement reviewed? 

Credit agreements are not the type of document that you buy “off the shelf” or “set and forget.” They should be regularly reviewed to ensure that their terms are compliant with legislative changes and are reflective of the nature and service offerings of the business as it evolves.   

Results Legal regularly reviews credit agreements and is pleased to offer Advivo clients a complimentary, no-obligation check-up and review of their credit agreement and related documents that govern their supply to customers. 

This will provide you with certainty in knowing whether or not your business is on the right track, or if your current credit agreement is leaving your business exposed to unnecessary risk. 

Want to find out more? 

Do you want to know more about client agreements, shareholders agreements or business separation disputes? Find out more by reading our recent article, in which we summarise some of the most common legal and commercial issues that arise in shareholders disputes. 

Results Legal will also be presenting at Advivo’s August event: Setting Up, Scaling up, Checking up. 

We will share the other lessons and takeaways from our review and provide practical advice that businesses should be following when setting up or scaling up, or at any stage along the business lifecycle. We look forward to seeing you there. 


Written by Michael McDonnell, Principal and Cameron Clough, Associate of Results Legal 



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