CREDIT APPLICATION AND AGREEMENT: A MODEL FORM
By Jonathan Sauer

INTRODUCTION

In my near thirty years of experience - I am literally hoary* with age - I have found that very many sand & gravel, concrete, paving, equipment rental, contractors’ supply businesses and other companies who extend often alarming amounts of open credit have either no credit application and agreement or a poor one.

Some might find as humorous the origin of the following form. The author met a certain credit manager in a seminar he taught for a certain trade organization. The credit manager of the same said she wanted a very good custom credit application prepared, which would provide maximum protection to her company under a wide variety of circumstances. Relying on that request, the author prepared the undersigned agreement, which was developed through several drafts with communications back and forth with the credit manager. After awhile, it was finished to the credit manager’s satisfaction. The author rendered a bill of about eleven hundred dollars reflecting only some of the time put into this effort.

The credit manager called in a panic. She said she wasn’t authorized to engage counsel and would get in trouble if she tried to process this bill. Moreover, she had thought that free legal services was part of the services provided to members of this organization. The author calmly inquired, then, what was the amount the credit manager would be willing to pay for developing this form. She said: “twenty-five dollars”. The author said ‘fuggeddaboutit.’

For a short, but intense, period of time after this conversation, the author uttered words of scandalous content, words he remembered from his German heritage. A Hollywood producer happened to be sitting nearby and decided to make a movie out of the experience. It was just released: “Meet the Fockers”!

Now, at least 150% of the people who take the time to read this article - in other words, they don’t particularly feel like working right about now but want to appear busy! - will rejoin: “There’s no way we could get anyone to sign this.” Sales-driven organizations will not use much or any of it and will have a lot of trouble with their bad accounts. Organizations which are more credit-driven will use some of this and will likely have easier collections, particularly where there are personal guarantors. The author understands and would say that if you only used a third of it, your company might be better off than it is now, flying sans a written credit application. The author suggests that you treat this suggested form like Thanksgiving turkey leftovers. Gnaw on one part of it. Then, later, gnaw on another part of it.

CREDIT APPLICATION AND AGREEMENT

(Here, just beneath the words ‘CREDIT APPLICATION AND AGREEMENT’, identify the name of the company who is requesting credit, including its telephone and fax numbers.)

The above-named COMPANY in consideration of and for the purposes of APPLICANT’S agreements and representations herein contained this CREDIT APPLICATION AND AGREEMENT (Agreement) shall include any subsidiary, parent company, division, affiliated, sister or related companies and entities, predecessor or successor-in-interest of COMPANY.

APPLICANT, whose legal name is ______________________, and whose principal place of business is at _________________, ________________, __________ herein applies to COMPANY for credit. For all purposes of this Agreement, APPLICANT herein acknowledges and agrees that the term “APPLICANT” shall include and apply to any subsidiary, parent company, division, affiliated, sister or related companies and entities, predecessor or successor-in-interest of APPLICANT.

I. APPLICANT IS A:

(1) Corporation . Yes ( ) No ( ) (If APPLICANT is a corporation, please indicate:

(a) State/Year of incorporation: and APPLICANT should attach to this document a copy of the latest corporation annual report filed in the state in which APPLICANT maintains its principal place of business.)

(b) President __________________, whose home address is _________________, ___________

and whose home telephone number is _________________________

(c) Treasurer __________________, whose home address is _________________, ___________

and whose home telephone number is _________________________

(d) Person authorized by APPLICANT to make credit decisions and commitments with regard to this Agreement _____________________, whose position with APPLICANT is _________________, whose home address is _________________, _____________, _____

and whose home telephone number is _________________________

(e) Federal Tax Identification Number/Social Security Number ____________________

(f) APPLICANT’s telephone number: _________________________

APPLICANT’s fax number: _________________________

APPLICANT’s e-mail address: _________________________

(2) Partnership : Yes ( ) No ( ) (If APPLICANT is a partnership, please indicate the names, home addresses and home telephone numbers of all general partners on a separate piece of paper and attach it to this document. Also fill in categories (d) through (f) above.)

(3) Sole Proprietorship : Yes ( ) No ( ) (If APPLICANT is a sole proprietorship, please indicate its principal’s name and home address and home telephone number on line (b) above. Also fill in categories (d) through (f) above.)

(4) Limited Liability Company : Yes ( ) No ( ) (If APPLICANT is an LLC, please provide a copy of an official filing to this effect, as filed in the state or your principal place of business, demonstrating the address of the LLC and the names and addresses of listed members and when said entity was first organized. Also fill in categories (d) through (f) above.)

(5) Other: Yes ( ) No ( ) (If APPLICANT is not a corporation, partnership or sole proprietorship, please describe your organization in the following space: _____________________. Please indicate the names and home addresses of all principals of APPLICANT on a separate piece of paper to be attached hereto. If APPLICANT is a realty trust, please attach to this document a copy of the declaration of trust filed with the appropriate registry of deeds. If APPLICANT is a limited liability company or limited liability partnership, please attach to this document whatever organizational document is on file with the Secretary of State’s Office/Department of Corporations in the state in which APPLICANT is organized. Also fill in categories (d) through (f) above.)

(g) Names and addresses of any affiliated companies or entities to APPLICANT

Name: __________________________; Address: ________________________

Telephone number: ____________________; Fax number: ____________________

Relationship to APPLICANT: _____________________________________

Name: __________________________; Address: ________________________

Telephone number: ____________________; Fax number: ____________________

Relationship to APPLICANT: _____________________________________

Name: __________________________; Address: ________________________

Telephone number: ____________________; Fax number: ____________________

Relationship to APPLICANT: _____________________________________

II. CREDIT AMOUNT/PROJECT APPLIED FOR:

If this application is for a specific project, please identify the project by Owner:

_________________, whose address is ___________________; the name of the project or job: ______________________________, the specific street address of which is ________________________; the general contractor’s name: ________________________, and principal address: ___________________, __________________, ___________; if the project is bonded, attach a copy of any payment bonds which might pertain to the same, including bonds given by APPLICANT or by the general contractor. If an open account status is request, please identify desired amount of credit: ______________________.

III. TRADE REFERENCES:

Name: __________________________________________

Street Address:________________________________________________________________

Telephone and fax numbers: Telephone: __________________ Fax:_________________

Contact person: ____________________

Amount of current credit line:_________________

Name: _____________________________________________

Street Address:________________________________________________________________

Telephone and fax numbers: Telephone: __________________ Fax:_________________

Contact person: ____________________

Amount of current credit line:__________________

Name: _____________________________________________

Street Address:________________________________________________________________

Telephone and fax numbers: Telephone: __________________ Fax:_________________

Contact person: ____________________

Amount of current credit line:__________________

Name: _____________________________________________

Street Address:________________________________________________________________

Telephone and fax numbers: Telephone: __________________ Fax:_________________

Contact person: ____________________

Amount of current credit line:__________________

IV. BANK REFERENCE:

Name:__________________________________; Account Officer: _______________________

Street Address of branch APPLICANT deals with: __________________, ____________, ____

Checking Account Number: ___________________; Credit line amount:___________________

Amount of Credit line currently available: _______________________

Telephone number: _______________________; Fax number: ______________________

V. INFORMATION CONCERNING APPLICANT:

(a) Type of APPLICANT’S licenses held: _________________________________________; in what state(s): ____________________, _____________________, ___________________

(b)Does APPLICANT have a current bonding program? Yes ( ) No ( )

(If yes, please give the name of your bonding company ___________________________ and please provide the following information concerning your insurance agent):

Name: ____________________________________________________________

Address: _________________, ______________, ______; Tel. number:____________________ Fax number: _____________________; Contact person: ________________________

(c) Has APPLICANT, including any predecessor company or business organization or APPLICANT’S current president or treasurer, ever filed for personal/corporate bankruptcy or insolvency or made an assignment for benefit of creditors in any state? If the answer is “yes”, please provide full particulars on a piece of paper, attaching the same to this document.

(d) Current financial statement (audit, compilation or review) attached? Yes ( ) No ( )

VI. TERMS AND CONDITIONS:

In consideration of COMPANY’S evaluation of this application for credit and in consideration of any extension of credit to APPLICANT by COMPANY, if any - either previously or subsequently given - APPLICANT herein agrees and acknowledges that the following terms and conditions apply to its credit relationship with COMPANY and to COMPANY’S evaluation of this credit application:

1. COMPANY’S receipt of this filled-out Agreement is for its consideration of APPLICANT’S request for credit. All decisions as to the extension of initial credit or the continuation of the granting of credit or the denial of credit are herein acknowledged by APPLICANT as being solely within the purview and sole discretion of COMPANY.

2. APPLICANT acknowledges that the statements herein contained within Agreement are true to his/her/its knowledge and further acknowledges that the representations herein made are material to COMPANY’S consideration of this Agreement and that COMPANY will rely on the truth of the statements made herein.

3. APPLICANT herein authorizes COMPANY and its representatives to make such inquiry and to gather such additional credit information from any source in COMPANY’S sole discretion and hereby authorizes all such sources to answer such inquiry with true, accurate, current and complete information concerning APPLICANT.

4. Payments are due to COMPANY within thirty days of each rendered invoice. The ‘rendered’ date of any invoice is the earlier of the actual date of the invoice or the date the invoice is transmitted by COMPANY to APPLICANT.

5. Any invoices which are overdue and delinquent (meaning unpaid within thirty days after rendering) shall earn simple interest until such invoice is paid in good funds at the highest rate allowed by the law of the state COMPANY is located in or, if applicable, of whatever state law may be applicable to the transaction underlying the invoice in question.

6. If COMPANY in its sole judgment turns this account over to a collection agency or attorney for collection, APPLICANT herein agrees that such reasonable collection and legal fees and expenses will be added to APPLICANT’S indebtedness, whether or not suit is actually ever brought.

7. No representative of COMPANY can vary the terms of this Agreement by any oral statement.

8. APPLICANT herein warrants that every request he/she/it makes of COMPANY for the provision of goods and services constitutes an express representation that APPLICANT both intends to pay for such goods and services within the terms of this Agreement and has the ability to do so.

9. APPLICANT herein agrees to provide COMPANY with information about any change in the ownership or management of APPLICANT or of any changes to APPLICANT or his/her/its business which may have an impact on APPLICANT’S ability to comply with the terms of this Agreement.

10. APPLICANT herein agrees that COMPANY may offset any credits or monies otherwise due to APPLICANT on any of APPLICANT’S (or any of his/her/its affiliated companies’ or entities’) other jobs or general account as to amounts due to COMPANY as to any particular invoice(s).

11. To the greatest extent allowed by any applicable law, this Agreement shall be considered as a contract for any project to which COMPANY actually supplies goods and services to or which project such goods and services are actually intended for but shipped to a different location for purposes of any applicable mechanic’s lien statute.

12. APPLICANT herein acknowledges that if the amount of credit granted to APPLICANT by COMPANY changes at any time, whether by increase or decrease, this Agreement will continue to apply to the credit relationship between APPLICANT and COMPANY without a further writing.

13. As to COMPANY and APPLICANT’S obligations thereto under this Agreement, to the greatest extent allowable under applicable law, APPLICANT and any personal and other guarantors listed below waive any rights to prior presentment of claims, of dower, curtesy or homestead.

14. APPLICANT herein acknowledges and agrees that if APPLICANT’S account becomes delinquent and remains so for thirty days, to the greatest extent allowable under applicable law, this Agreement may serve as a security agreement for all purposes recognized under and by the Uniform Commercial Code.

15. APPLICANT herein specifically agrees that if any provision of this Agreement is void or unenforceable by any applicable law, all remaining provisions of Agreement shall remain in full force and effect.

16. This Agreement subsumes and replaces any prior oral or written agreements, representations or statements made by and between APPLICANT and COMPANY and their respective representatives.

17. This Agreement applies to any extension of credit and/or provision of goods and services to APPLICANT by COMPANY, whether made prior to or subsequent to the execution of this Agreement.

18. COMPANY’S actual extension of credit subsequent to APPLICANT’S execution of this Agreement or COMPANY’S execution of any other document or letter acknowledging its agreement with or acceptance of this Agreement shall be deemed as COMPANY’S execution of this Agreement for the purposes of entering into this Agreement.

Signed and sealed as a sealed instrument in _______________, __________________, this ______________ day of _______________, 2005.


___________________________________
APPLICANT’S LEGAL NAME

By: _____________________________

Position with APPLICANT:_________________________

Then appeared before me _____________________, this _________ day of ______________, 2005 to me personally known, who after being duly sworn stated that the execution of this Agreement was his/her free act and deed and that he/she is authorized by APPLICANT to execute the same on its behalf.

______________________________________

NOTARY PUBLIC

My commission expires:

VII. PERSONAL AND OTHER GUARANTORS:

In consideration of COMPANY’S consideration of this credit request and in further consideration of any credit which COMPANY may hereinbefore or hereafter extend to APPLICANT, each and every one of the undersigned individuals and companies do hereby, jointly and severally, agree to and guarantee each and every one of the obligations and terms assumed herein this Agreement by APPLICANT, waiving any suretyship or prior presentment to APPLICANT defenses. Any undersigned personal or other guarantor may terminate this guaranty by sending written notice to COMPANY at its principal place of business by certified mail, return receipt requested, with such termination to take effect ten days after COMPANY’S actual receipt of such termination but only as to any future provision of goods and services to APPLICANT from that tenth day forward. Further, each and every one of the undersigned personal and other guarantors acknowledges that he/she/it has received a valuable benefit by COMPANY’S consideration of this Agreement and/or from any extension of credit to APPLICANT by COMPANY, whether previously or subsequently made. This guaranty is for an indefinite term and will continue in full force and effect until terminated by any of the undersigned in accordance with this paragraph.

Signed and sealed in _______________, __________________, this ______________ day of _______________, 2005.

___________________________________

(Type name of person signing above here)

Soc.Sec./Federal tax I.D.#: __________________________

Residential Address: _________________________________

Then appeared before me _________________, this _________ day of ______________, 2005 to me personally known, who after being duly sworn stated that the execution of this Agreement was his/her free act and deed.

______________________________________

NOTARY PUBLIC

My commission expires:

Signed and sealed in _______________, __________________, this ______________ day of _______________, 2005.

___________________________________

(Type name of person signing above here)

Soc.Sec./Federal tax I.D.#: __________________________

Residential Address: _________________________________

Then appeared before me _________________, this _________ day of ______________, 2005 to me personally known, who after being duly sworn stated that the execution of this Agreement was his/her free act and deed.

______________________________________

NOTARY PUBLIC

My commission expires:

Signed and sealed in _______________, __________________, this ______________ day of _______________, 2005.

___________________________________

(Type name of person signing above here)

Soc.Sec./Federal tax I.D.#: __________________________

Residential Address: _________________________________

Then appeared before me _________________, this _________ day of ______________, 2005 to me personally known, who after being duly sworn stated that the execution of this Agreement was his/her free act and deed.

______________________________________

NOTARY PUBLIC

My commission expires:

Copyright Jonathan Sauer 2005
Visit our Web Page for lots of neat stuff: www.sauerconstructionlaw.com

*The word ‘hoary’ is not intended to suggest that the author participates in temporary social relationships having a certain pecuniary element with surprisingly available and friendly women in lowly establishments having questionable devotion to concepts of cleanliness and/or safety, or, for that matter, conducting one’s business in alleys. (One, otherwise, might infer the same absent this protestation as, like these friendly women, most attorneys work by the hour!) Rather, Mr. Webster suggests that this word is defined as “gray or white with or as if with age.” An alternative definition, quite succinctly, is ‘very old’. The author finds that as the aging process advances, he is getting somewhat more sensitive about being called ‘old.’ Those failing to recognize this sensitivity may find that they are subject to being visited by the author and two or three hundred of his motorcycling-riding buddies without much, if any,advance notice. Please be advised that if we visit you after three am, breakfast will be expected and we’re all pretty big eaters. Otherwise, we reserve the right to do burn-outs on your front lawn!