Credit sale agreement

A credit sale agreement is a contract for the sale of goods under which the buyer pays in instalments, becoming the owner of the goods either when the contract is made or on completion of payment, depending on the terms of the individual contract.

This subject matter of this type of type of transaction is sometimes referred to as “offering credit” and, after the provision the goods or services, the party who benefited from the receipt owes the other party a business debt. This business debt is repayable under the payment terms of the contract.

There is an element of risk in these types of transactions, as a purchaser may not be able to pay their debts when they become due and payable. To protect against this a seller may require that a customer provide security, such as, in the context of a company, a director guarantee.

Another way that a seller may be able to protect themselves is the inclusion of a retention of title clause in the credit sale agreement. This clause, also known as a “Romalpa” clause, allows for a purchaser to have possession of the goods, however they do not acquire title from the seller until the final purchase price is paid.

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