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How to secure payment for goods and services

Contract Law News | March 2016

Payment in advance or COD

Many businesses who supply goods and services can request payment up front or pre-payment and this is the most obvious and secure way to ensure you receive payment. Cash on delivery is also a complete defence in most cases to avoid being “nabbed” by a liquidator of a failed company [or a trustee in bankruptcy] for clawing back a “preference” payment for payments received by you in the 6 months before a company was wound up or an individual has been bankrupted.

If Cash On Delivery is not available in your case, you can ask for a (substantial) deposit for the goods or services. A deposit not only provides some security for cash flow, particularly to cover your out of pocket expenses, but a deposit may also provide an indication of the genuineness of the customer’s intentions to honour the contract for the receipt of goods and services from you.


Another tip is payment by instalments once a deposit has been paid, and in the case of the supply of services over a period of time, or the supply of goods over a period of time, we advise that smaller, more frequent instalments are preference to larger, less frequent instalments. It is preferable to have someone owe you $10,000 before you stop work, than owing you $100,000. In your terms and conditions you can specify that failure to pay an instalment may result in you stopping the performance of services or stopping the supply of goods.

Security Interests

Forum Law also advises suppliers of goods to obtain a Security Interest over the goods supplied and that Security Interest ensures that you retain title to the goods or the proceeds of the sale of those goods until such time as the customer has fully paid for the goods. A Security Interest must be properly documented and registered to be effective and to obtain a priority over other competing interest holders, like a liquidator in a winding up of the Customer, or any other person who has actual possession of the goods once they have been delivered by you to your Customer.

A Security Interest over a Customer’s assets is also a means of ensuring payment for your goods and services. This was previously referred to as a “company charge” but since the introduction of the Personal Property Securities Act in 2012 is referred to as a “Security Interest”.

Be aware of your rights at law

Some industries have statutory regimes to assist business in payment for goods and services including to enable a healthy cash flow. The building and construction industry is governed by the Building & Construction Industry Security of Payment Act which provides a strict timetable for payments by customers to the provider of building and construction services and goods, other than where the project is a home for the customer to live in. At Forum Law we are constantly amazed at how some large construction companies try to avoid their obligations under this Act and try to force building contractors and sub contractors to enter into contracts allowing timeframes for payment that do not comply with the Act.

Forum Law can advise and assist you as a provider of building and construction goods and services that you are paid on time and that your rights are protected and, if you receive goods and services, that you are aware of your obligations and entitlement when required to pay. Call us on 02 9560 3388 for an obligation-free 30-minute consultation.

Forum Law is an active member of several reputable law and industry associations. We have recently obtained ISO9001 accreditation.