No matter what the relationship is between two parties involved in a payment plan, the first thing any business-wise person will tell you is to "get agreements in writing." Small Claims Court and Civil Court are loaded with cases made on a handshake or an "idea" of when things would be repaid.
Reason for Simple Payment Plans
Simple payment plan agreements can create a binding contract between two or more parties. While many states recognize verbal contracts, a written document is viewed as a binding contract in any location. An agreement protects both the parties from discrepancies and disputes later. Simple payment plans are used to state the obvious; when and how money is to be transferred. The emotions and potential concerns that may arise later are mostly eliminated with the use of a written agreement.
The Introductory Statement
When writing a simple payment plan agreement use clear language and as many details as possible. First download the free simple pay plan agreement found in our Media Gallery. In the sample agreement, you will find the following items in the first paragraph:
- The dates when payments are to be paid
- The amounts to be paid
- The beginning and ending dates of the payment schedule
- The total amount due
- Both the name and address of the parties involved
- The date the agreement was written
The Payment Schedule
When writing the simple payment plan agreement, make sure to insert the payment schedule. This can be placed in the middle of the document and should have a line after each amount where the recipient can initial to show receipt of the funds. Both parties should sit down with a calendar and visually plan what dates will be listed. This is where the agreement goes from verbal to written because the amounts and time frame are now in physical form.
Transfer of Property
This section is optional and should be included only when there is a transfer of physical property such as a car. In the case of a simple payment plan agreement you want to keep this section simple as well. If the item is already in the possession of the buyer, state that the rights to ownership of that item are now transferred to the buyer. If the item is being held, state that the item and the ownership to that item are now transferred to the buyer.
Statement of Refund or Deposit
This section of a simple payment plan agreement should cover the occurrence of a refund, if there is a refund issued and on what terms. Usually this is offered for a physical item unless the item is sold "as is"; if the item is being sold "as is" this fact must be stated in the introductory statement. This section allows either party to back out of the agreement in a specified amount of time (usually 30 or 60 days) without penalty.
The final section of the payment plan agreement is where the signatories sign and date the document. Once the seller/lender and the buyer/borrower sign and date the agreement it becomes a legal contract. Each party should sign their name, then print their name followed by the date of the signatures. Make sure the dates of the signatures match.
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