Creating a Deferred Payment Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a deferred payment agreement can be a valuable option for individuals and businesses alike. This type of agreement enables parties to manage the payment of a debt without needing to resort to litigation to do so, and provides greater flexibility, as well as reducing the risk of default.

Genie AI provides an easy way for anyone, whether or not they are a lawyer or legal expert, to draft and customize high-quality legal documents such as deferred payment agreements. Our open source legal template library is the world’s largest; millions of data points train Genie’s AI on what constitutes a market-standard agreement. Our step-by-step guidance makes it easy to create your own customized document with no need for an account - we just want to help! Read on below for more information on how you can access our template library today.

Definitions (feel free to skip)

Deferred Payment Agreement: A contract between two parties where one party pays the other party at a later date than originally agreed.
Researching applicable laws and regulations: Investigating the laws and rules that must be followed when creating a deferred payment agreement.
Industry standards: The usual practices of a particular industry that are accepted by all parties in the industry.
Identifying the parties: Listing out the two parties involved in the agreement including contact information and other relevant information.
Establishing payment amounts, frequency, and due dates: Deciding on the total amount to be paid, how often payments will be made, and when each payment is due.
Outlining any penalties for late payments: Specifying what consequences will be incurred if payments are not made by the due dates.
Any other relevant terms: Other conditions that apply to the agreement including warranties, length of agreement, etc.
Establishing a timeline for payments: Making a plan for when payments will be made.
Accounting for any irregular payments: Taking into consideration any payments that may not be part of the regular payment schedule.
Establishing a payment method: Deciding how payments will be made, such as cash, check, money order, etc.
Writing up the agreement: Drafting the agreement in a way that outlines all of the terms of the agreement in a clear and easy to understand format.
Obtaining all necessary signatures: Making sure that all parties involved in the agreement have read and agreed to the terms of the agreement before signing.
Verifying applicable laws and regulations: Checking to make sure that the agreement is compliant with all applicable laws and regulations.
Obtaining necessary licenses: Getting any required licenses or permits from the relevant government bodies.
Sending payment reminders: Sending out notifications to the parties involved in the agreement to remind them of their payment obligations.
Recording payments: Keeping accurate records of all payments made under the agreement.
Updating the agreement as needed: Making sure that the agreement reflects any changes that have been made.
Working with clients to resolve payment issues: Working with the parties involved in the agreement to address any payment issues.
Determining the best course of action for each situation: Evaluating each situation and deciding on the best approach for resolving payment issues.
Notifying all relevant parties: Informing all parties involved in the agreement when the agreement is being terminated.
Finalizing any remaining payments: Completing any payments that are still owed or refunding any prepaid payments.
Documenting the termination: Keeping a record of the agreement being terminated.

Contents

• Understanding the Basics of Deferred Payment Agreements
• Researching applicable laws and regulations
• Familiarizing yourself with industry standards
• Defining the Terms of the Agreement
• Identifying the parties
• Establishing payment amounts, frequency, and due dates
• Outlining any penalties for late payments
• Establishing any other relevant terms
• Working Out a Payment Plan
• Establishing a timeline for payments
• Accounting for any irregular payments
• Establishing a payment method
• Drafting and Signing the Agreement
• Writing up the agreement
• Obtaining all necessary signatures
• Ensuring Compliance with Regulatory Bodies
• Verifying applicable laws and regulations
• Obtaining necessary licenses
• Managing the Agreement over Time
• Sending payment reminders
• Recording payments
• Updating the agreement as needed
• Troubleshooting Common Issues
• Working with clients to resolve payment issues
• Determining the best course of action for each situation
• Terminating the Agreement
• Notifying all relevant parties
• Finalizing any remaining payments
• Documenting the termination

Get started

Understanding the Basics of Deferred Payment Agreements

• Learn about the types of deferred payment agreements available
• Research and understand the regulations and laws surrounding deferred payment agreements
• Understand what alternatives are available
• Familiarize yourself with the criteria for a deferred payment agreement and how it is different from other payment arrangements
• Understand the terms, conditions, and restrictions associated with a deferred payment agreement
• Determine when a deferred payment agreement is the best option
• When you have a full understanding of the basics of a deferred payment agreement, you can move on to the next step.

Researching applicable laws and regulations

• Read relevant legal documents related to deferred payment agreements
• Consult with a legal professional to answer any questions you have
• Understand the specific laws and regulations in your area that may affect deferred payment agreements
• Make note of any pertinent information that is uncovered
• Once you are confident that you have a good understanding of the relevant laws and regulations, you can move on to the next step.

Familiarizing yourself with industry standards

• Read up on the applicable industry standards for the type of agreement you are creating.
• Learn about the common terms and conditions that are used in these agreements.
• Research any common issues and problems that could arise from the agreement.
• Understand the different types of payment options that are available and the requirements for each.
• Check for any changes or updates to the industry standards since the last time this agreement was created.

Once you have gained a thorough understanding of the industry standards and have researched any changes and updates, you can move on to the next step of defining the terms of the agreement.

Defining the Terms of the Agreement

• Decide on the terms of the agreement and write them down in a document
• Make sure that all relevant details are included, such as payment amounts, payment schedule, any interest rates, and any other conditions that may apply.
• Create a signature page for all parties involved to sign and make sure that both parties have copies of the agreement.
• When all parties involved have signed the agreement and all details are finalized, the agreement is ready to be implemented.

Identifying the parties

• Identify each party involved in the agreement, including the creditor and the debtor
• Record the full legal names, addresses, and contact information of each party
• Ensure all parties involved are aware of their legal rights and responsibilities
• Obtain signatures from all involved parties
• Once all parties have agreed to the terms and signed the agreement, you can move on to the next step.

Establishing payment amounts, frequency, and due dates

• Calculate the total amount owed by the debtor.
• Determine what percentage of the total amount will be paid with each installment.
• Establish the due dates for each payment.
• Agree on payment method(s).
• Ensure that all payment amounts, frequencies, and due dates are incorporated in the agreement.
• When the payment amounts, frequencies, and due dates have been agreed upon and incorporated into the agreement, you can check this step off your list and move on to outlining any penalties for late payments.

Outlining any penalties for late payments

• Determine the late payment penalty that will be applied.
• Draft the language for the late payment penalty clause and any other related provisions, taking into account applicable laws.
• Consider including a grace period before the late payment penalty is applied (e.g. a 5-day grace period).
• Specify the late payment penalty rate (e.g. 1% of the outstanding balance per month).
• Detail the consequences in the event of late payments (e.g. suspension of services or collection actions).
• Include a provision that states that the late payment penalty is in addition to the total balance owed, not in lieu of it.
• Finalize the language of the late payment penalty clause.
• Check off this step as complete and move on to the next step.

Establishing any other relevant terms

• Determine any other terms or conditions for the Deferred Payment Agreement, such as the responsibility for late fees or interest
• Include any additional requirements, such as the submission of progress reports or other documents to track progress
• Make sure all relevant terms are specified in the agreement
• Review the agreement with both parties to ensure all parties understand and agree to all the terms
• When both parties are in agreement, sign the agreement and date it
• Keep a copy of the signed agreement for all parties involved.

Working Out a Payment Plan

• Discuss and agree on the amount of each payment
• Specify the due date and frequency of payments
• Consider setting up automatic payments or payment reminders
• Outline any penalties or late fees that may apply
• Once an agreement is reached, document it in writing
• You’ll know you’ve completed this step when you and the other party have agreed on the payment plan and it is documented in writing.

Establishing a timeline for payments

• Talk to your creditor to establish an agreed-upon timeline for payments.
• Decide on a payment schedule and frequency that works best for both parties.
• Ensure that the timeline is realistic and that you have enough money to make the payments.
• Document the timeline in writing and have both you and your creditor sign it.
• You can check this step off your list once the timeline has been agreed upon and documented in writing with both parties having signed it.

Accounting for any irregular payments

• Review the payment plan to determine if there are any irregular payments (i.e. payments made at intervals longer than the timeline established)
• If there are any irregular payments, note them down and adjust the payment plan accordingly
• Ensure that all payments are accounted for in the payment plan
• Keep track of any changes made to the payment plan
• When all payments have been properly accounted for in the payment plan, you’re done with this step and can move on to establishing the payment method for the deferred payment agreement.

Establishing a payment method

• Choose a payment method that works for both you and your customer.
  Options for payment include:
• Cash
• Credit Card
• Direct Debit
• Bank Transfer
• Make sure to document the payment method chosen in the agreement.
• When this step is completed, you should have a payment method in place for the customer to make their payments.

Drafting and Signing the Agreement

• Gather the necessary documents and signatures from all parties involved
• Ensure all parties understand the agreement and have read through it
• Sign the agreement
• Make copies of the agreement for all parties
• File the agreement with the applicable authorities, if necessary
• You can check off this step when all parties have signed the agreement and it is filed with the applicable authorities (if necessary).

Writing up the agreement

• Gather the necessary information from both parties, including contact information, amount owed, payment terms, and any other pertinent details
• Include a provision for legal action if the agreement is breached
• Ensure that the agreement is written in plain language and is legally binding
• Have both parties sign and date the agreement
• Make sure that both parties receive a copy of the agreement
• When all of the information is gathered and the agreement is signed, you can check this step off your list and move on to the next step.

Obtaining all necessary signatures

• Gather all paperwork including the Deferred Payment Agreement, any supporting documents, and any additional forms that need to be signed
• Make sure to have all parties sign the agreement, including any guarantors
• Double-check the signatures to make sure they are all valid
• Once all necessary signatures are obtained, make sure to keep a copy of the signed agreement for your records
• You will know that you have completed this step when you have all of the signed documents in hand.

Ensuring Compliance with Regulatory Bodies

• Ensure that the terms of the Deferred Payment Agreement comply with all applicable local, state, and federal laws
• This includes making sure the terms of the agreement are legally binding and do not violate any consumer protection laws
• Research and document any applicable laws and regulations that must be taken into account
• Consult with a lawyer if necessary to ensure compliance
• Once you have ensured that the agreement is compliant with all applicable laws and regulations, you can check this off your list and move on to the next step.

Verifying applicable laws and regulations

• Research applicable laws and regulations for creating a Deferred Payment Agreement in the relevant jurisdiction.
• Identify any additional laws and regulations that may be applicable to the agreement.
• Confirm that any necessary licenses, permits, or registrations have been obtained.
• Obtain legal advice from a qualified lawyer familiar with the applicable laws and regulations.
• When all laws and regulations have been identified and confirmed, you can move on to the next step.

Obtaining necessary licenses

• Determine if any licenses, permits, or certificates are required to create a deferred payment agreement
• Check with the appropriate local, state, and/or federal agencies to find out what is needed
• Apply for and obtain the necessary licenses, permits, or certificates
• Keep track of all necessary licenses, permits, or certificates
• Make sure documents are up-to-date
• You’ll know you have completed this step when you have acquired the necessary licenses, permits, or certificates for your deferred payment agreement.

Managing the Agreement over Time

• Monitor the agreement to ensure payments are made on time
• Keep track of the payments that have been made and the payments that are still outstanding
• Set up a reminder system to send payment reminders to the customer at key milestones
• Make sure to communicate any changes to the agreement, such as payment amounts or due dates
• Keep records of all communication, payments, and changes for future reference
• Check off this step once all payments have been made according to the agreement.

Sending payment reminders

• Send payment reminders at the times agreed upon in the initial payment agreement.
• Ensure that all payment reminders are sent in writing, either via email or snail mail.
• Keep a log of all payment reminders sent, and make sure to document any responses from the customer.
• You can check this step off your list when all payment reminders have been sent.

Recording payments

• Record payments in the Deferred Payment Agreement system
• Ensure payment amounts and dates are accurately logged in the system
• Monitor account activity to ensure payments are processed correctly
• Resolve any discrepancies or errors between payments and the agreement
• Check off this step when all payments have been recorded correctly in the system

Updating the agreement as needed

• Review the payment agreement to make sure all information is accurate and up-to-date
• Make any necessary changes to the agreement to reflect changes in the payment plan
• Ensure that all signatures and dates are accurate and up-to-date
• When all changes are complete, make sure to save the agreement
• You can check this off your list once all changes have been made and the agreement is up-to-date.

Troubleshooting Common Issues

• Identify the common payment issues that may arise
• Identify areas where payment is not being processed correctly
• Investigate the issue and take steps to resolve it
• Document the issue and the steps taken to resolve it
• Monitor the issue to ensure the issue is resolved
• Check that the client is satisfied with the resolution
• Update the agreement as needed

Once all of the above have been completed, you can move on to the next step: Working with clients to resolve payment issues.

Working with clients to resolve payment issues

• Reach out to the client in a timely manner to discuss the payment issue.
• Explain the payment issue to the client and how the issue arose.
• Listen to the client’s explanation and any concerns they may have.
• Offer to work with the client to resolve the payment issue.
• Explore payment options with the client, such as a deferred payment plan.
• Present the client with the agreement for the deferred payment plan.
• Explain the terms of the agreement to the client, including when payments are due and the consequences for missed payments.
• Get the client to sign the agreement and make sure you have a copy of the signed agreement for your records.
• Follow up with the client regularly to ensure that payments are being made on time.

You’ll know you can check this off your list and move on to the next step when you have a signed agreement from the client for the deferred payment plan and you’ve followed up with the client to ensure they are making payments on time.

Determining the best course of action for each situation

• Identify the root causes of the issue and review the client’s financial history (e.g., past due amounts, payment frequency, etc.).
• Evaluate the client’s ability to meet the terms of the Deferred Payment Agreement (DPA) and consider the length and amount of time required to pay off the debt.
• Determine the best course of action based on the client’s financial history and circumstances.
• Consider the impact of the DPA on the client’s credit score and ability to pay other creditors.
• Make sure the DPA is in the best interests of both the client and the business.

How you’ll know when you can check this off your list and move on to the next step:

• When you have evaluated the client’s financial history and determined the best course of action that is in the best interests of both the client and the business.

Terminating the Agreement

• Ensure that all contractual obligations have been met before terminating the agreement
• Draft a termination notice to be signed by the parties involved
• Arrange for the termination notice to be signed by all parties
• File the termination notice with the relevant government agency or court
• Record the date and time of the termination in the agreement
• Make sure all documents related to the agreement are stored appropriately
• Notify all relevant parties of the termination

Once all the steps above have been completed, you can check this off your list and move on to the next step.

Notifying all relevant parties

• Notify all parties involved in the agreement that it is being terminated and that a deferred payment agreement is being created
• Let them know the details of the agreement, including the amount to be paid and the payment due dates
• Obtain confirmation that all parties involved have been notified
• Confirm that all parties have accepted the terms of the deferred payment agreement
• Once you have received confirmation from all parties, you can move on to the next step of finalizing any remaining payments.

Finalizing any remaining payments

• Collect any remaining payments according to the terms of the agreement
• Calculate and compare the remaining balance owed against the total amount agreed upon
• Ensure all necessary payments are made and received
• You’ll know when the payments are finalized when all amounts owed are paid in full and you can close out the agreement.

Documenting the termination

• Provide the customer with a written termination agreement, including the date of termination, the outstanding balance of the account, and any other relevant information.
• Include a clause in the agreement that states the customer agrees to pay the balance in full according to the terms of the deferred payment agreement.
• Make sure to include contact information for the customer in the agreement.
• Sign and date the agreement, and have the customer sign it as well.
• Once both parties have signed the agreement, keep a copy on file, and provide the customer with a copy.
• You will know this step is complete when you have a signed agreement on file and the customer has a copy.

FAQ:

Q: What is a Deferred Payment Agreement?

Asked by Liam on 11th April 2022.
A: A deferred payment agreement is an arrangement between two or more parties that allows one party to delay payment of an obligation until a later date. This type of agreement is commonly used in business and financial transactions, such as between a lender and borrower, or creditor and debtor. It can also be used to restructure existing debt or to allow a party to purchase goods or services over time. The terms of a deferred payment agreement are typically set out in a contract and can vary greatly depending on the parties involved.

Q: What are the legal requirements for creating a Deferred Payment Agreement in the UK?

Asked by Ava on 5th June 2022.
A: The legal requirements for creating a deferred payment agreement in the UK depend on the type of agreement you are entering into and the parties involved. Generally, for a legally binding deferred payment agreement to be valid, it must be in writing, contain all relevant information about the parties involved and their obligations, be signed by both parties, and not be contrary to any applicable laws or regulations. Additionally, it should clearly outline the payment terms and any applicable interest rate or late payment charges.

Q: Are there any specific regulations related to Deferred Payment Agreements which I should consider if I work in the technology sector?

Asked by Owen on 27th February 2022.
A: Yes, if you work in the technology sector there are certain regulations related to deferred payment agreements which you should consider when creating such an agreement. For example, consumer protection legislation may apply if you are providing goods or services to consumers as part of the agreement, while data protection legislation may apply if any personal data is collected or processed as part of the agreement. Additionally, certain consumer credit laws may apply when setting out the terms of repayment and any associated interest rates or late fees.

Q: How does a Deferred Payment Agreement differ from other types of financial arrangements?

Asked by Abigail on 7th August 2022.
A: A deferred payment agreement differs from other types of financial arrangements in that it allows one party to delay payment of an obligation until a later date, rather than having to make payments at regular intervals as with other types of agreements such as loans or mortgages. Additionally, under a deferred payment agreement there is usually no interest rate charged on the balance outstanding, making it an attractive option for those who need to make larger purchases but do not have access to liquid funds at that time.

Q: What are some common uses for Deferred Payment Agreements?

Asked by William on 15th October 2022.
A: Deferred payment agreements are commonly used in business and financial transactions such as between lenders and borrowers, creditors and debtors, or for restructure existing debt. They can also be used to purchase goods or services over time instead of paying for them upfront, allowing businesses or individuals with limited funds access to larger purchases without having to take out a loan or pay interest charges. They can also be used for medical bills where the patient agrees to pay for their treatment but is unable to pay immediately due to lack of funds.

Q: What are some potential risks associated with entering into a Deferred Payment Agreement?

Asked by Sophia on 13th December 2022.
A: There are several potential risks associated with entering into a deferred payment agreement which should be considered before signing such an agreement. These include the risk that one party may default on their obligations under the agreement; that either party may not be able to fulfil their obligations due to unforeseen circumstances; that either party may not have sufficient funds available when payments are due; and that either party may breach their obligations under the contract without being held liable for any damages caused by this breach. Additionally, if either party fails to abide by their obligations under the contract then this could lead to legal action being taken against them which could result in costs incurred both financially and legally.

Q: What happens if one party fails to fulfil their obligations under a Deferred Payment Agreement?

Asked by Jacob on 22nd May 2022.
A: If one party fails to fulfil their obligations under a deferred payment agreement then this could lead to legal action being taken against them which could result in costs incurred both financially and legally. Depending on the terms of the contract they could be held liable for damages caused by their breach as well as any other costs resulting from their failure to abide by the terms of the contract. In some cases it might also mean that they forfeit any right they had under the contract which could include losing any right they had to receive payments from the other party or having any obligation they had waived or reduced.

Q: Is it possible for me to change the terms of my Deferred Payment Agreement after I have signed it?

Asked by Noah on 4th January 2022.
A: Generally speaking it is possible for you to modify or change certain aspects of your deferred payment agreement after it has been signed provided that all parties agree to these changes and sign off on them in writing. However, depending on your particular agreement there may be certain restrictions placed upon what can be changed after signing so it is important that you read through your contract carefully before making any changes. Additionally, if you are making changes which have an impact on any third-parties then these parties will need to agree before any changes can be made legally binding.

Q: Are there any tax implications I should consider when entering into a Deferred Payment Agreement?

Asked by Emma on 24th July 2022.
A: Yes, there are certain tax implications which you should consider when entering into a deferred payment agreement depending on your jurisdiction’s tax laws and regulations as well as your particular situation (e.g., whether you are running a business or working as an individual). Generally speaking, income received through deferred payments will usually be considered taxable income which means you will need declare this income when filing taxes each year unless specifically exempted under applicable law or regulation (e.g., certain types of investments). Additionally, depending on your jurisdiction there may also be additional taxes applicable such as sales taxes imposed upon goods or services purchased through deferred payments agreements so it is important that you understand all applicable taxes before entering into such an arrangement so as not incur any unexpected tax liabilities down the line

Example dispute

Deferred Payment Agreement Lawsuits

• A plaintiff might raise a lawsuit referencing a deferred payment agreement if the agreement has been breached. A violation of the agreement could include failing to make payments, making payments late, or not holding up other terms of the agreement.
• The plaintiff would need to prove that a valid agreement was in place and that the other party breached the agreement. This could be done through contract analysis, examining the terms of the agreement, and obtaining evidence of any payments or lack thereof.
• Depending on the nature of the breach, the plaintiff might be able to seek damages or other remedies. Damages might include lost profits, interest payments, or any other costs associated with the breach.
• Settlement might be possible through negotiation or mediation. If an agreement cannot be reached, the court might need to determine the amount of damages, using the evidence provided by the plaintiff and the defendant.
• In some cases, the court might also award punitive damages, which are meant to punish the defendant for their breach of contract.
• Depending on the circumstances, a successful lawsuit could result in the defendant being ordered to pay the plaintiff’s legal fees.

Templates available (free to use)

Helpful? Want to know more? Message me on Linkedin