“I am owed money but there was no contract in place”
This is a common statement I see and hear across social media and the business community from business owners who have not been paid for the goods or services they have delivered.
Not only does it cause a huge amount of stress it obviously has a huge effect on your cash flow.
This blog will explain not only what to do if you had no written terms to your business transaction but also how to reduce the likelihood of being in this situation again.
All too often business owners will with the eagerness of completing a business transaction, won’t think to put in place the legally binding terms that stipulate the basis of that business contract. Usually getting a written agreement is the last thing businesses think off when setting up a new business but it is undoubtably one of the most important.
When I hear ‘there was no contract’ what is really meant is 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 proposes to business owner B that they will build them a new website for example, the emails are exchanged and the contract is agreed when business owner B says “please go ahead”. On the face of it a relatively simple transaction. Should there be issues along the way however this is where it may get a little more complex.
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 on social media who are owed money is ‘move on’, ‘get over it’, ‘it’s not worth it’ and ‘learn from this.’
However, I disagree, if you have delivered the website then you absolutely within your rights to 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. This can be done by evidencing that the contract existed by whatsapp messages even.
Of 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, a long drawn-out process 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 correct in some circumstances. Unless the evidence is clear cut it probably is not worth your time or money taking the non-payment to court.
What you should do is learn from the ‘non payment’ 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.
Next Steps?
If you need any more help with a legal contract, speak to BEB. We can write a bespoke business contract to suit your exact needs.
BEB are contract law specialists based in Northampton. We draft bespoke and well written business contracts on a fixed price basis. Our legal packages offer flexibility depending on the number of documents you require. Whether you require a business to consumer or business to business contract we are here to help!
We are contract drafting and contract review providers. We can advise and negotiate all contracts to protect you from unfair terms and conditions as well as support you with any ongoing contractual issues – we would be like your very own comprehensive in-house legal department.
We also offer debt recovery services, relieving you from chasing late payments and improving your cash flow.
If you need any of these legal and contract services get in touch with us today on 01604 217365 or info@bebconsultancy.co.uk