Collection of accounts clause: Copy, customize, and use instantly
Introduction
A collection of accounts clause outlines how unpaid debts will be handled. It sets clear expectations for both parties, helping avoid disputes and providing legal protection. This clause is important in contracts where managing overdue payments is crucial to maintaining cash flow.
Below are templates for collection of accounts clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Seller-friendly variation
This version is best for sellers who want clear, enforceable rights to collect overdue payments. It gives the seller control over when and how collection actions are taken.
The buyer agrees to pay invoices upon receipt. If payment is overdue, the seller can begin collection actions, including using third-party agencies or legal action, at the buyer’s expense. The seller may also suspend further deliveries until the debt is cleared.
Buyer-friendly variation
This version protects buyers by allowing them to dispute charges before collection actions are taken. It ensures fairness if there is a disagreement over the invoice.
If the buyer disputes any invoice, they must notify the seller in writing within 30 days. Both parties agree to resolve the dispute in good faith. The seller will not start collection actions while the dispute is being handled, and no interest or penalties will apply during that time.
Neutral variation
This version balances the interests of both parties. It outlines clear steps for collections but allows room for negotiation if issues arise.
Both parties agree to work together to resolve overdue accounts. The seller will send a written notice of overdue payment after 30 days. If the debt remains unpaid after 60 days, the seller may begin collection actions, but will offer the buyer a final chance to pay or arrange a payment plan before taking further steps.
Alternative legal approach
This version focuses on resolving payment issues through mediation before any collection actions are taken, preserving the business relationship.
Before pursuing formal collection, both parties agree to try mediation to resolve any unpaid debt. If mediation fails within 60 days of the overdue notice, the seller may proceed with collection actions, with costs to be allocated as determined during mediation.
Collection clause with dispute resolution
This clause includes a provision for resolving payment disputes before involving third-party collectors, allowing for a more measured approach to collections.
Payments are due within [number] days. If the Buyer fails to pay by the due date, they have an additional [number] days to resolve any disputes related to the invoice. After this period, the Seller may refer the debt to a collection agency and will be entitled to recover all associated fees, including those of legal or collection agencies.
Immediate collection clause
This variation allows for immediate action by the seller to initiate collections, without any grace period, making it more seller-advantageous.
If payment is not received within [number] days of the invoice due date, the Seller may immediately refer the outstanding debt to a third-party collection agency. The Buyer will be responsible for all recovery costs, including legal fees, and acknowledges that the Seller may pursue legal action to recover the balance due.
Flexible collection clause
This clause allows the creditor some flexibility in how they approach collection, including a series of steps to follow before escalating the matter to third-party agencies.
The Buyer agrees to pay within [number] days of receipt of the invoice. If payment is not received, the Seller may issue a reminder within [number] days. If the balance remains unpaid after [number] additional days, the Seller may initiate collection proceedings through a third-party agency, with all related costs to be borne by the Buyer.
Late payment penalty clause
This clause imposes a penalty for late payment, incentivizing the Buyer to settle the debt promptly, while outlining the consequences of non-payment.
Payments must be made within [number] days. If the Buyer fails to make payment on time, a late fee of [percentage]% of the overdue amount will be charged for each [number] days the debt remains unpaid. The Buyer will also be liable for any costs associated with debt collection, including legal and third-party collection agency fees.
Escalation clause with interest
This variation provides a clear escalation process for overdue debts, including interest and third-party collection costs.
If payment is not received within [number] days, the Seller may charge interest on the overdue balance at a rate of [percentage]% per month. After [number] days of non-payment, the Seller may refer the debt to a third-party collection agency, and the Buyer will be responsible for all recovery costs, including legal fees and agency charges.
Mediation-first collection clause
This clause focuses on mediation and negotiation before resorting to collections, allowing both parties a chance to resolve disputes amicably.
Payments are due within [number] days. If the Buyer fails to pay within this period, both parties agree to first attempt to resolve the issue through mediation. If mediation is unsuccessful, the Seller may refer the matter to a collection agency, with the Buyer liable for all recovery costs, including any legal fees.
Collection clause with termination rights
This variation includes the option for the Seller to terminate the agreement if the Buyer fails to pay within a specified period.
If the Buyer fails to pay within [number] days of the invoice date, the Seller may terminate this Agreement and refer the unpaid balance to a collection agency. The Buyer will be responsible for all outstanding debts, plus late fees of [percentage]% per month, and any costs associated with collection, including legal fees.
Grace period collection clause
This clause provides a grace period before taking formal collection actions, allowing the Buyer more time to settle the debt without immediate consequences.
The Buyer agrees to pay within [number] days of receiving the invoice. If payment is not received within this period, the Seller may provide an additional [number] days as a grace period. If the debt remains unpaid after this extension, the Seller may initiate collection proceedings and recover all associated costs, including legal and agency fees.
Automatic late fee collection clause
This variation automatically applies late fees for overdue payments, incentivizing the Buyer to settle the debt without requiring additional reminders or actions.
Payments are due within [number] days from the invoice date. If the Buyer fails to pay within this period, a late fee of [percentage]% will automatically be added to the overdue balance. The Buyer will also be liable for any costs related to collection, including third-party agency fees and legal charges.
Hardship allowance collection clause
This clause includes an allowance for the Buyer to request additional time or an adjusted payment plan based on financial hardship, providing a flexible solution before initiating collection.
If the Buyer is unable to pay the invoice within [number] days, they may submit a written request for an extension due to financial hardship. The Seller may grant a maximum extension of [number] days, but if the debt remains unpaid after this period, the Seller may begin collection procedures, with the Buyer liable for all related fees.
Third-party collection option clause
This clause allows the Seller to choose a third-party collection agency after a specified period of non-payment, ensuring that recovery actions are taken promptly.
If the Buyer fails to pay within [number] days, the Seller may immediately refer the debt to a collection agency for recovery. The Buyer will be responsible for all fees and expenses associated with the collection process, including agency commissions and any legal fees incurred.
Account suspension collection clause
This variation provides for the suspension of services or product deliveries until the outstanding payment is made, acting as an immediate consequence for late payments.
The Buyer agrees to pay the full amount due within [number] days. If payment is not received, the Seller reserves the right to suspend all services or deliveries until the debt is paid in full. The Buyer will also be liable for all collection costs, including third-party fees, if the matter is escalated.
Payment plan collection clause
This clause allows the Buyer to enter into a structured payment plan if they cannot pay the full amount upfront, with clear terms on how the debt will be collected.
If the Buyer fails to pay within [number] days, they may request a payment plan. If approved by the Seller, the Buyer agrees to pay the outstanding balance in [number] equal installments over a period of [number] months. If any installment is missed, the full remaining balance will become immediately due, and the Seller may initiate collection proceedings, with the Buyer responsible for all collection costs.
Minimum payment collection clause
This clause specifies a minimum payment amount due at regular intervals, ensuring that partial payments are made until the debt is cleared.
The Buyer agrees to pay a minimum of [amount] per [week/month] until the total debt is paid in full. If the Buyer fails to make the minimum payment within [number] days of the due date, the Seller may refer the debt to a collection agency and will be entitled to recover all associated costs, including agency fees and legal charges.
Refund withholding collection clause
This clause enables the Seller to withhold any refunds or credits due to the Buyer until the outstanding debt is settled.
The Buyer acknowledges that if any amounts are due under this Agreement, the Seller has the right to withhold any pending refunds or credits until the outstanding debt is fully paid. If the Buyer fails to settle the debt within [number] days, the Seller may initiate legal proceedings or refer the debt to a collection agency, and the Buyer will be liable for all associated costs.
Security interest collection clause
This clause grants the Seller a security interest in certain assets of the Buyer until the debt is paid in full, ensuring that the Seller has recourse if the Buyer fails to pay.
As collateral for payment, the Buyer grants the Seller a security interest in [specific assets]. If payment is not made within [number] days of the due date, the Seller may take possession of the collateral and apply it to the outstanding balance. The Buyer agrees to bear all costs associated with the recovery of the debt, including legal fees and collection agency charges.
Legal action after notice collection clause
This clause outlines that legal action may be pursued only after a formal notice is sent to the Buyer, giving them time to resolve the matter.
If the Buyer fails to pay within [number] days of the invoice date, the Seller will send a formal notice of overdue payment. If the Buyer does not respond within [number] days, the Seller reserves the right to initiate legal action and will be entitled to recover all related costs, including court fees and attorney expenses.
Automatic account referral clause
This clause automatically refers the overdue account to a collection agency after a set period of non-payment, without requiring further action from the seller.
If the Buyer fails to pay within [number] days of the invoice date, the Seller will automatically refer the account to a collection agency for recovery. The Buyer agrees to cover all costs associated with collection, including fees for the agency and any legal expenses incurred.
Partial payment allowance clause
This clause permits the Buyer to make partial payments, but sets conditions for those payments to prevent the debt from accumulating further.
The Buyer may make partial payments towards the outstanding debt, provided each payment is made within [number] days of the agreed payment date. If the total debt remains unpaid after [number] days, the Seller may initiate collection procedures, and the Buyer will be responsible for any related collection fees and legal costs.
Early settlement discount clause
This variation offers the Buyer a discount for settling the debt before the due date, incentivizing timely payment.
If the Buyer settles the full amount due within [number] days of the invoice date, they are eligible for a [percentage]% discount on the outstanding balance. If payment is not received within this period, the Seller may charge interest on the overdue amount and refer the debt to a collection agency, with the Buyer responsible for all collection-related fees.
Credit reporting collection clause
This clause allows the Seller to report the overdue debt to credit bureaus, affecting the Buyer’s credit rating if payment is not received.
If the Buyer fails to pay within [number] days, the Seller reserves the right to report the overdue debt to credit bureaus. The Buyer will be responsible for all collection costs, including third-party fees, legal charges, and any reporting fees associated with the credit reporting process.
Escrow hold collection clause
This clause requires the Buyer to place the owed amount in escrow, ensuring the Seller can recover the debt if payment is delayed.
The Buyer agrees to deposit the full amount due into an escrow account within [number] days. If payment is not made within this period, the Seller may request the release of funds from the escrow account to cover the outstanding balance. The Buyer will be responsible for all escrow and collection fees.
Debt forgiveness clause
This clause provides the option for the Seller to forgive part of the debt if the Buyer settles a portion of the balance by a specified deadline.
If the Buyer settles [percentage]% of the outstanding debt within [number] days, the Seller may forgive the remaining balance. If the Buyer fails to meet this condition, the full debt will remain due, and the Seller may initiate collection actions, with the Buyer responsible for all associated costs.
Legal judgment clause
This clause authorizes the Seller to seek a legal judgment against the Buyer in the event of continued non-payment.
If payment is not received within [number] days, the Seller may seek a legal judgment in court to recover the full amount owed, including any applicable interest and fees. The Buyer will be responsible for all legal costs, including court fees and attorney expenses, associated with the legal process.
Chargeback clause
This clause gives the Seller the right to reverse any payments made by the Buyer via credit card or other payment methods if the Buyer fails to honor the debt.
In the event the Buyer does not pay the full amount within [number] days, the Seller has the right to reverse any previous payments made by the Buyer, including chargebacks. The Buyer will be responsible for any related fees and all costs incurred in recovering the outstanding balance.
Confession of judgment clause
This clause requires the Buyer to agree to a confession of judgment, allowing the Seller to obtain a judgment against the Buyer without a trial if payment is not made.
The Buyer agrees to a confession of judgment, allowing the Seller to obtain a judgment for the unpaid balance in the event of non-payment within [number] days. This clause authorizes the Seller to file the judgment in court without the need for a trial. The Buyer will be liable for all costs related to the judgment, including legal fees and court charges.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.