The past months were quite hectic. This was also the reason why we published only a few new articles on this site. Various motor sport communities had to cope with budget problems, more specifically the collection of accounts receivable (Forderungen/vordering/cuentas de clientes/comptes clients/conto clienti).
Quite some sponsors, teams and drivers failed to pay their debts (Schuld/schuld/deuda/dette/debito).
Consequently, cash flow problems were caused and some teams had to realign or even cease their motor sport business. Some went even bust.
Motorsportlaw.org provides to you -in the sole interest of our beloved sport and a financial healthy motor sport business- some financial instruments to endeavour protection against non-payment.
Contracts are only paper as you know, and the only thing that really matters to cover your budget is cash and/or security that payment will arrive in time.
How can this be achieved? Below you will find a short summary of some financial instruments that are electronically made available upon request. This service of motorsportlaw.org is free-of-charge but without any warranties.
The best way is of course pre-payment, but in real life this is not always feasible because everybody has the same interest: pay as late as you can. When you allow payment in installments, the due dates of each installment should be prior to the respective races. If the driver/team/sponser does not pay in time, you are entitled to suspend your obligations as well. Your counterparty will fail to attend the race. This approach is of course quite risky, because you still have no payment security in your hands.That's why we make (electronically) available to you the following financial instruments that should safeguard that payment will arrive in time:
1. Bank guarantee for motor sport
This is the most preferred instrument, because the bank will pay to you upon first demand if your counterparty fails to pay. The cost of such a bank guarantee are quite acceptable. Downside is that a bank will not issue such a guarantee if your counterparty has no creditlines or collaterals available. But if know this beforehand, you can make a better assessment about the financial soudness of your counterparty.
2. Confirmed letter of credit (Kreditbrief/documentair krediet/carta de credito/lettre de credit/lettera dit credito)
This is a somewhat similar instrument like the guarantee, but you have to present the documents to the bank as prescribed in the l/c. This security works reciprocally: your counterparty has security that you perform (e.g. by making available the racecar during each specific event) and you have the security that you will be paid by the bank when you complied with the presentation of the required documents (e.g. entryform for that event signed-off by the organiser).
3. Parent company guarantee (Garantie Muttergesellschaft/matriz/companie mere/casa-madre)
This instrument is not issued by a bank, but by the parent company of your counterparty. when is is duly signed of by a financial sound parent company, it provides an extra security to you, when your counterparty (as affiliated company of said parent) is short of cash or even enters in bankruptcy proceedings.
4. Personal Indemnity (Burgschaft/borgtocht/fianza/caution/cauzione)
When a director of your counterparty has to guarantee personally to you that his company will pay, for sure he will prevent that his company does not pay. Especially when this director privately owns assets (like real estate). A personal indemnity may also work in case your counterparty is a natural person such as a driver. This personal indemnity should then be signed by a third party like his father (provided he owns enough assets).
5. A pledge (Verpfandung, prenda,nantissement,pegno)
Your counterparty may have some accounts receivable in his books that can be assigned to you, so that you are entitled to the collection.
Please be aware that your local laws may require specific formalities to be fulfilled before such financial instruments become effective. That's why we refer you to your local motor sport lawyer.
Please note: this info is meant for educational and demonstrative purposes only. Review this legal information with your motor sports attorney before using them in your particular situation.
Motorsportlaw.org makes no warranties, express or implied regarding the use or legal enforceability of the legal information listed on this site.
