Court of Appeal emphasises the importance of knowing your customer

Article

17 June, 2010

It is not often that cases dealing with debt recovery reach the Court of Appeal, but on 15 June 2010 judgment was handed down in one such case which serves as a useful reminder of the importance of taking steps to identify who you are selling to.

The case concerned a fruit and vegetable supplier. They took an order from a chef at an Inn and commenced supplying produce. Although they sent a credit application form to the Inn it was not completed and not chased by the supplier.

Produce was not paid for, so the supplier commenced proceedings. The Inn was run by a company, but by that time the company was insolvent, so the supplier sued the company owner/director. The supplier argued that because the owner of the company had taken no steps to notify the supplier that they were a company she could not hide behind the limited liability.

The Court of Appeal disagreed. They decided that the supplier knew that the chef was acting on behalf of his employer, but because they had not confirmed the identity of the employer, they took the risk of not knowing who they were contracting with. They were therefore unable to recover from the owner.

Identifying who you are selling to is not always as straightforward as it seems, but is crucial. Having the correct name of your customer makes a successful recovery more likely. A sample credit application form which will capture this information is available to be downloaded free of charge on our website. If you require further information on steps you can take to make a successful recovery of debt more likely, such as by your trading terms or a personal guarantee, then please speak to one of our team.

For further information please visit Debt Collection and Recovery or contact Alison Nelson on Tel: 01254 222399 or contact Alison Nelson by email.

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