“I am owed money but there was no contract in place”
This is a common statement I see across social media from business owners. Not only does it cause a huge amount of stress it obviously has a huge effect on your cash flow.
All too often with the eagerness of completing a business transaction, you won’t think to put in place the legally binding terms that stipulate the basis of that business contract.
When I hear ‘there was no contract’ what is really meant is that, there was no written agreement alongside the contract. It is likely there is of course a contract but to chase overdue payments it is more difficult to determine what even that contract was. What is a contract? goes into detail on how a contract is formed and not every contract is written.
If business owner A promises their customer a MOT for example, the money is exchanged and the contract is completed with the receipt of the MOT certificate. A relatively simple transaction. Should works need to be done it is then it may get a little more complex.
A business may want to purchase a laptop, again if paid for at the time the goods were ordered there is no chance you as a business will need to chase any money. Still doesn’t mean terms are not needed since they protect against a whole heap of scenarios.
If payment doesn’t happen and the deal starts turning into a dispute over what is owed and whether the obligations were fulfilled, you would need to consider what legal avenues are open to you to get what is owed to you.
“The success of any legal action will then depend on what evidence you can provide to show that the debt is owed.”
Usually the response to this type of post is ‘move on’, ‘get over it’, ‘it’s not worth it’ and ‘learn from this.’
You can of course still take someone to court for non-payment without a written contract in place but the burden of proof is on you to prove that the amount you are claiming is due. However court should be your last resort in attempting to recover any money and you should feel confident you have enough evidence to prove that the debt is due. If you did work for the client and you have that evidence with emails, time sheets, documents, meeting notes etc then English Contract Law may apply. If the works is complete, but not to their satisfaction or you both are on different pages on what was agreed then this is when it can get complicated, long and a drain on your business. The energy you are putting into this means less energy spent on getting new clients and more sales. You would struggle to have a case if the works isn’t complete, or they cancelled almost immediately and what is decided is down to the judge on the day.
I do somewhat agree that the ‘it’s not worth it’ comments are quite correct. Unless the evidence is clear cut it probably is not worth your time or money. However if you are going to learn from ‘non payment’ do this by getting every single future transaction you are party to protected by terms and conditions. You really shouldn’t be doing business without terms and conditions in place. This doesn’t just mean for what you are selling but also for what you are buying too. If you are paying someone to build you a website or print your business merchandise, ask to see their terms. It protects both parties in any business transaction and by not having any you run the risk of getting burnt.
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