An exclusivity promise can outlast the overdue debt it settles
Assess customer exclusivity requested as a debt-settlement concession, including scope and displaced future work.
Corporate Recovery Partners
01 / 06
The offer restricts more than this account
A customer agrees to discuss payment of an overdue balance if your business promises not to work for its competitors. That request reaches beyond the debt being settled. Obtain legal advice on the actual clause and assess its commercial effect before agreeing. Do not treat it as a free concession merely because it does not reduce today's invoice amount.
Ask which customers, services, locations and time period the restriction covers. A named project and an entire industry can have very different effects. Record what is unclear in the proposed wording. Avoid telling the customer that the restriction is acceptable while assuming your adviser will later narrow it to the meaning you had in mind.
Business.gov.au's contract guidance recommends clear terms and understanding the contract before signing. Use that approach here: have the adviser review the proposed exclusivity, its relationship to existing obligations and the consequences of breach. This article does not determine whether a particular restriction is enforceable or whether it can be imposed in your circumstances.
Imagine the requested promise would prevent you servicing several regular customers for a year. Identify the affected work, likely contribution and commitments already made. Keep confirmed bookings separate from speculative opportunities. The comparison should show the capacity and revenue potentially displaced, not assume every lost enquiry would otherwise become a profitable job.
Discuss whether the customer's actual concern could be addressed through a more limited arrangement, subject to advice and agreement. Do not silently substitute your preferred interpretation for the proposed clause. Check who inside your business can approve the trade-off and whether the operating team can identify the customers or activities covered in practice.
Evaluate the expected recovery alongside the duration and cost of the restriction. If an agreement is reached, retain the final documents and communicate the reviewed limits to the people allocating work. Settling an overdue account can be valuable, but the decision should include any future business being surrendered in return, rather than measuring the outcome only by money received today.
