Non Paying Clients
Discussion
Situation is as follows, although I can't be too specific, as litigation will follow.
Small firm of electrical contractors carry out work on a new project. Due to the builders being so poor, the project runs for a longer period of time than was anticipated, several contractors stay on site for a number of months, large building firm agrees to pay for this.
Building firm blatantly refuses to pay for this and work done by other contractors too, as despite being an enormous company with a billion pound turnover they still want to make their profit.
The amount in dispute is ~£80k, which causes electrical contractors serious problems. Privately, the large firm have said that if the contractors persue payment they will dispute everything in order to draw out the litigation and drive the contractors to liquidation to avoid paying for the work.
Currently, 60 days have not elapsed since the invoice was issued, but they will not change their mind.
I have yet to see the contract but it appears the contractors are entitled to the money, the larger firm is simply refusing payment for as long as possible to force the contractors to the wall.
What is the best way forward?
Small firm of electrical contractors carry out work on a new project. Due to the builders being so poor, the project runs for a longer period of time than was anticipated, several contractors stay on site for a number of months, large building firm agrees to pay for this.
Building firm blatantly refuses to pay for this and work done by other contractors too, as despite being an enormous company with a billion pound turnover they still want to make their profit.
The amount in dispute is ~£80k, which causes electrical contractors serious problems. Privately, the large firm have said that if the contractors persue payment they will dispute everything in order to draw out the litigation and drive the contractors to liquidation to avoid paying for the work.
Currently, 60 days have not elapsed since the invoice was issued, but they will not change their mind.
I have yet to see the contract but it appears the contractors are entitled to the money, the larger firm is simply refusing payment for as long as possible to force the contractors to the wall.
What is the best way forward?
Not being legally minded or having been in this situation I would suggest it depends on whether the contractor can afford the time and costs to chase this, or whether they can afford not too.
I.E. will they go out of business if not paid and will they go out of business chasing the money.
Maybe a compromise can be reached somewhere between what is really owed and the contractor going out of business. Some way that both sides can save some face and legal bills. At the end of the day the large company is going to have large legal bills to fight the case, which may well be more than the outstanding debt. So they may be willing to do a deal. Or they may just decide to be bloody minded and take the issue all the way no matter what the cost.
It's a shame that there is no fast track, cheap, way to force the large company to pay but I doubt that there is. So same old situation of the big boys bullying the small boys.
I.E. will they go out of business if not paid and will they go out of business chasing the money.
Maybe a compromise can be reached somewhere between what is really owed and the contractor going out of business. Some way that both sides can save some face and legal bills. At the end of the day the large company is going to have large legal bills to fight the case, which may well be more than the outstanding debt. So they may be willing to do a deal. Or they may just decide to be bloody minded and take the issue all the way no matter what the cost.
It's a shame that there is no fast track, cheap, way to force the large company to pay but I doubt that there is. So same old situation of the big boys bullying the small boys.
Muncher said:
several contractors stay on site for a number of months, large building firm agrees to pay for this.
Building firm blatantly refuses to pay for this and work done by other contractors too,
Can you clarify this point? Did the large building firm agree and then change it's mind? How was the agreement recorded? Minuted at site meeting perhaps or in correspondence? Must be something along the lines of breach of contract.
mutt k said:
several contractors stay on site for a number of months, large building firm agrees to pay for this.
Building firm blatantly refuses to pay for this and work done by other contractors too,
Can you clarify this point? Did the large building firm agree and then change it's mind? How was the agreement recorded? Minuted at site meeting perhaps or in correspondence? Must be something along the lines of breach of contract.
Although I haven't seen the contract yet their stance seems to be along the lines of "yeah we're breaching the contract, but what are you going to do about it?"
Except that factors will usually not take on invoices already at 60 days, or disputed invoices. They will also come back to you for a rebate as soon as the debt becomes difficult to recover (they do not pursue the debt for you) this will leave you in a worse situation than before.
Nick
Nick
I'm no lawyer, but perhaps a winding up order on the main contractor would put the fear of god in them. 21 days to pay isn't it.
Now if the main contractor was in actual difficulty (and some big ones are at the moment, not invoved with poor rail maintenance are they?), then they will bluff it out and let you appoint a liquidator which costs a large fortune and save them the expense.
If they aren't I think they will pay up. We did this once to a Chapter 11 Telecoms firm who were still trading in the UK. They paid.
Now if the main contractor was in actual difficulty (and some big ones are at the moment, not invoved with poor rail maintenance are they?), then they will bluff it out and let you appoint a liquidator which costs a large fortune and save them the expense.
If they aren't I think they will pay up. We did this once to a Chapter 11 Telecoms firm who were still trading in the UK. They paid.
I can recommend a commercial debt recovery outfit, they'll do the chasing and issue the winding up orders or whatever's needed to get your dosh. They're not the knuckle-dragging types, very pro outfit & they've heard all the excuses!
I know this sort of stuff is right up their street. Chambers Legal in Liverpool (they cover all over the UK). 0151 708 9808.
(No link to them other than they've helped me out in the past)
I know this sort of stuff is right up their street. Chambers Legal in Liverpool (they cover all over the UK). 0151 708 9808.
(No link to them other than they've helped me out in the past)
XM5er said:
I'm no lawyer, but perhaps a winding up order on the main contractor would put the fear of god in them. 21 days to pay isn't it.
Now if the main contractor was in actual difficulty (and some big ones are at the moment, not invoved with poor rail maintenance are they?), then they will bluff it out and let you appoint a liquidator which costs a large fortune and save them the expense.
If they aren't I think they will pay up. We did this once to a Chapter 11 Telecoms firm who were still trading in the UK. They paid.
Sorry if it's too late but the Winding Up method only works if you know the client cannot dispute it. Trust me, I've had several thrown out of court by them debtor just shouting DISPUTE!
It's a shite state of affairs in the construction industry and although I hate to say it - the best approach may be to simply agree a lower valuation to protect your cashflow....
as i understand it;
i) if A enters into a contract with B to do work for B in return for payment from B
and
ii) at some stage before the contract is completed difficulties arise
and
iii) B therefore promises A an additional payment in return for A's promise of continuation of the contract
and
iv) as a result of giving the promise B obtains a benefit
and
v) B's promise is not given under economic duress or fraud on the part of A
then
vi) the benefit to B is capable of being consideration for B's promise of payment, so that the promise will be legally binding.
thats pretty basic case law as set out in 'williams v. roffey bros. & nicholls (contractors ltd)'
roughly translated that means,
the contractors knew there were problems on the job and asked the electrical firm to carry on untill it was completed in return for additional payment. that agreement of payment and therefore continuation of the job was beneficial (the job is completed) to the contractors, therefore that can form part of the contract and is enforcable.
any good comercial law firm should be able to sort it out, i can recommend www.orj.co.uk
good luck
simon
i) if A enters into a contract with B to do work for B in return for payment from B
and
ii) at some stage before the contract is completed difficulties arise
and
iii) B therefore promises A an additional payment in return for A's promise of continuation of the contract
and
iv) as a result of giving the promise B obtains a benefit
and
v) B's promise is not given under economic duress or fraud on the part of A
then
vi) the benefit to B is capable of being consideration for B's promise of payment, so that the promise will be legally binding.
thats pretty basic case law as set out in 'williams v. roffey bros. & nicholls (contractors ltd)'
roughly translated that means,
the contractors knew there were problems on the job and asked the electrical firm to carry on untill it was completed in return for additional payment. that agreement of payment and therefore continuation of the job was beneficial (the job is completed) to the contractors, therefore that can form part of the contract and is enforcable.
any good comercial law firm should be able to sort it out, i can recommend www.orj.co.uk
good luck
simon
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