Aaron Tiger, LL.L, LL.B Attorney
Commercial Law, Litigation and Insolvency
The views and opinions expressed here are those of the author, Aaron Tiger, of Tiger Banon Inc. attorneys, of Montreal, Canada, and do not necessarily reflect the views and opinions of the DRC.
We are often asked, in our practice how to avoid becoming involved in a transaction where the produce buyer is a person who is not in good faith and who has no intention to pay for the produce. In the situation where the buyer intends to act in bad faith, it is the seller who must protect itself against the bad faith buyer.
Some recommendations to protect yourself against getting involved in one of these situations would be the following:
Also call the DRC before you ship. They are knowledgeable regarding the persons involved in the industry.
If you have any doubts, ask for a bank draft and confirm the authenticity of the draft with the issuing bank, or, wait until the cheque has been confirmed by your bank to have been honored before sending another shipment. There are other forms of payment such a bank transfer which will assure that the funds are in the seller’s account. If the buyer advises you that a cheque has been sent, or sends you a copy a of cheque, or says they do not understand why you did not receive the cheque, consider putting a hold on any further shipments until a real payment confirmation is received. Establish a credit limit to minimize losses.
If you are shipping to a foreign jurisdiction, there are companies who insure payment, if the issue is non-payment and not an issue with the produce. The DRC can advise as to companies which provide this coverage.
IF YOU HAVE BEEN A VICTIM OF A TRANSACTION OF THIS TYPE, THERE ARE CERTAIN ACTIONS YOU MAY WISH TO TAKE;
Should an arbitration occur and the buyer fail to comply with the arbitration decision and award, the next step is to contact an attorney in Canada to verify if enforcing the arbitration award in court is an option. Unfortunately, in many cases, by the time the DRC award is granted the buyer is no longer in business and is nowhere to be found.
The authorities may not be able to do much in these cases for many reasons, due to overlapping jurisdictions, and the fact that the courts have often been reluctant to intervene in a business transaction. The courts may in many cases consider that in circumstances where a supplier sold merchandise and was not paid, the failure to pay may be deemed to be a civil matter between the parties and not a matter for the criminal justice system. It is still important to file a claim which may prevent a reoccurrence of the situation to another victim.
If the buyer is still operating, local legal counsel may be able to take a civil action to recover something, but the seller must act as quickly as possible once it knows of what had transpired.
We hope the above is helpful to you. The most important takeaway from this is you must remember to protect yourself and your own interests. Be aware of who you are dealing with and limit your losses with a strict credit policy.
Aaron Tiger has practiced law since 1978. In addition to holding a law degree from the Université de Montréal he also earned a second law degree from the University of Ottawa where he graduated Magna Cum Laude in 1992. Aaron has completed the Canadian Institute of Arbitrator arbitrator’s course as well as the DRC’s 2004 Mediation & Arbitration Training Seminar. He is fluent in both English and French.
The present is not meant to constitute a legal opinion on any matter. Please contact your attorney in order to obtain advice regarding a specific legal situation
The DRC welcomes members of the trade to submit articles for consideration for future editions of Solutions.