How do I handle an unpaid invoice?
I am looking for some advice regarding an unpaid/disputed invoice.
I recently did some work for a large construction company, which was on a labour-only basis. Unfortunately, I never signed a contract.
The materials were constantly being ordered late and it took even longer getting the contractor to source the correct materials. This resulted in many wasted visits to the site, which I invoiced for.
Then, as the job was overrun and with the wrong materials on site, I was asked (verbally) to do what I had to do to get the water to 136 flats. I did what was asked and after rectifying a small leak everyone was happy and I left the site.
I have since invoiced the company and after a few weeks of no reply I am now told that the leak has caused damage. I don't believe this is true and they also charged me for a outside contractor to come in and rectify snagging items. I made a credit note to them for over £2000 to off set against a £4500 invoice just so I could wash my hands with them and at least receive some payment.
They have not paid the remainder of what I invoiced for and I also don't understand where I stand as I was NEVER asked to return to site to rectify the snagging but they expect me to pay someone else who has.
I'm sorry if I have gone on a bit, but I need of some advice.
Many thanks.
Expert Answers
Sort by Date
Sort by Votes
Mar 19, 2016
Thanks for all the feedback guys. Thought I'd keep you updated on the situation.
Yesterday I finally received a email from the client saying the credit note of £2325 was not enough and now want £3300 + VAT!! He copied me into a second email along with the site manager asking him to if I was ever asked to return to site to rectify the faults ( there was maybe 1 day to rectify) which he hasn't replied to.
I wasn't ever asked to return to site to rectify these issues. Do I just take this to a small claims court now?
Mar 17, 2016
Unpaid house repairs / construction is a prevalent nag on the UK. Only carpet fitting is safe not even door or window frames! I suggest you accept this as endemic and just absorb the losses. Such are hard times. In 1996 the pipes burst in freak winter in Manchester which took days to repair. Here in Malaysia the standard of building also has declined. If you're a bona fide contractor next time be very professional and put some fear into your clients.
Mar 17, 2016
Richard Stern-send a copy of the:
1, Signed Order
2, Copy of the Invoice
3. Copy of the signed Proof of delivery
This information shows change of ownership and liability for the shipment.
The customer should pay the Invoice as this is a legal anf=d binding contract.
Good Luck.
Richard
Mar 17, 2016
Hi David.
Sorry to read your situation. I would say to you the lesion is learnt,
You have some great advise. Ali Zatash is correct.
The best way forward is to me factual, to the point and to make it as "Mater of fact" as possible. Short concise notes. If they want more information they can ask for it. Your actions and responses on the job is as good as having it in writing.
The company has not acted very well, buy not communicating the leak and engaging a third party without providing to you the opportunity to "make good" what ever it was. irrespective of who fault it is. That is if it was a problem anyways.
This part or their actions would be a challengeable action. If they are asking you to pay for it.
You have no control or knowledge regarding the scope of works requested and performed by the 3rd party, hence you can not workout if their billing is fair.
For future projects.
A contract would be nice.
Document all and any changes / variations and have them approved and signed off before executing.
Have a site manager sign you in and out of the site.
If the materials are not there, leave the site. only stay there is requested to and have that added and signed for as part of your variations.
Have your work checked and signed off as you go i.e at the completion of each stage. and at the end of the project.
Regarding your invoicing.
If it''s labour only arrange to be paid at set stages, (depending on the size of the project) and itemize the invoice. showing your standard work hrs and variation hrs. This way if there are any disputes you can easily separate aspects which may come up as a dispute. So that you can at least be paid for the non disputed aspects.
Its a hard lesion,
Mar 16, 2016
Not to rub salt in a wound, but please assume every job will have an issue that needs to have written guidance to resolve. Get a contract in place or don't do the work. It's even good if you yourself up a very brief, one-page contract (one-page doesn't scare people away) which covers liability issues and limits your exposure. Even basic information such as "I'm ME, you're YOU. YOU are hiring ME to do X work. I will be paid Y. ME is not responsible for any damages which might arise from malfeasance, neglect, abuse, etc... If YOU don't pay ME, I get my materials back, and you still owe ME, with a penalty fee."
I'm not sure you have any legal recourse to collect, but I would definitely continue to pursue it. I don't know if you have equivalent of a Better Business Bureau, or access to online ratings, or some agency to complain, but don't give up.
Mar 16, 2016
As other people have said, this needs to go to the Small Claims division of the County Court, You can find the detail of your local County Court in the localtelephone directory or making an enquiry on: "www.court-service.gov.uk"
You do not need a signed contract as this is an oral contract and if you can show that the work that was requested has been done, then it is up to them to defend the action.
Firstly, how were you approached by the company requesting your services?
Was it by letter or over the phone or orally?
If the request was by letter, that letter is an authority to carry out the work, and forms your contract (Implied Contract Terms Act), this can be exhibited to the Summons.
However, before we get to the litigation side of things, I just need to clarify a few of the points you make.
1. Who orderd the materials, you or the Company you contracted with, i.e.
the Construction Company?
If, as you seem to suggest they orderd the materials (I assume plumbing) for you to work with then the issue of supply is between them and the provider of the materials, then that is their problem not yours.
2. You say that you turned up at site to find the materials had not arrived.
Did you speak to the Foreman, or to the main contractor to ask where the
materials were and when they were to be delivered?
3. Did they give you a time/date e.g "they will be here tomorrow", which is a confirmation albeit orally that they wanted you on site the following day. You state that you have invoiced them for the days which were wasted.
4. You state that you mended a small leak, did you get a completion note to say that the work was completed satisfactorily on the attendance to the leak?
Was the leak as a result of your would be negligence, and was there damage created by the leak. (That could be a counter claim). Have they provided evidence of the damage or have you been back to site to inspect the repair yourself?
If not do so as soon as possible, take a camera with you and photograph the seen and the alledged damage. If the site manager/foreman who asked you to do the job is on site, or you can find him, see if he will give you a back dated certificate of completion. He has the authority of the company by the fact that he is elected Foreman/site manager- that is his job. The back dated certificate of completion shows that they were happy with the final work and if there is no mention of any damage that they were making a counter claim for the alledged damage caused by the leak on the completion letter, then they cannot counter claim later.
Do you have details of the other contractor who made good your would be non-completed work; has he got a certificate of satisfaction/completion note/signed time-sheet?
Ask him for a copy, of both the time shee/ completion note and the invoice he sent to the head office of the company you did the work for, also ask the other contractor whether he has been paid.
The party defaulting on you can't have it both ways, if the leak was still in existence when you came back the second time and after this other cotnractor is alledged to have done the work, then there is a question over his work and you have gone back to effectively put right both of your errors.
The fact that you have put the work right and offered a £2000 Credit Note shows good faith on your part and the fact that they have not disputed the Credit Note, is in effect an admission of the contract.
Mar 16, 2016
7 days later, telephone the office again and ask whether they have received the documents and demand payment. Make enquiries with Royal Mail to confirm that the letter was delivered, and ideally the name of the person who signed for it.
If they confirm that the Invoice and Credit Note have been received and that they are on the ledger, ask them to confirm the date it is to be paid, or ideally tell them that you expect it in the course of 7 days. Confirm that in a letter, again addressed to the Bought Ledger Manager, again by registered mail and put as a heading to the letter
"NOTICE OF INTENT TO COMMENCE LEGAL PROCEEDINGS"
In that letter state the moves that you have made to put matters right and if you can get copies of the proof of receipt of the recorded delivery letter, include that as well.
(Then make the demand)
Mar 16, 2016
"Unless payment of this invoice and the net account is not made within course of seven days from the date of this letter, proceedings will be commenced for the recovery of the sums due through the (name of your local) County Court.
If they fail to respond, then go to the Court, or if you have access to the internet, go to the site: "http//www.court-service.gov.uk".
Look up forms and look for the Form N1. you computer will need an "acrobat reader" software. If it does not have it, just use the hard copy from the Court Offices.
The form is simple to complete in box;
1. (Claimant) Your name and address
2. (Defendant) The name and address of the debtor
(if they are a Limited Company use the Registerd Office quoted on their
letter head)/
Mar 16, 2016
In the (name of the Court your are going to use, e.g. Oxford County Court)
In the matter of (Your name and the name that you trade under) Claimant
And
(The name of their company./business) Defendant.
______________________________________________________________
Particulars of Claim
Mar 16, 2016
Particulars of Claim:
1. date of the contract was struck and what was asked of you.
2. The nature of the work you did and how it was carried out and where.
3. State that there was a dispute with the work that you did and that you put it right and as "an act of good faith" issued a Credit Note to the value of £ against the original invoice (number) and its value £.... leaving a balance payable of £ ......
4. On the xyz (date) a telephone call was made to request payment of the
net balance.
5. On the abc (date) a letter demanding payment of the net sum due £....
was sent by registered mail to the Registered office of the Defendant.
6. The Defendant has failed to comply with the demands for payment, and is
held in breach of contract.
Mar 16, 2016
The Claimant Claims:
1. Payment of the net amount of £2500 being the net sum due to the
Claimant.
2. Costs (ask the Court what the costs are to issue the Summons)
3. Staturoy Interest at the rate of 8% per annum from the date of issue of this summons to Judgement date, and thereafter at the same rate until settlement of the sums due under the Judgement. (add that figure to the money owed in the Claim and insert the toal figure in the claim section of the Form N1
(Sign the document and attach it to the form N1 )
You will need to put on the form N1 with the amounts out are claiming and the costs entered in the box and the total sum to be paid.
If the Particulars of Claim runs in to more than one page, number the pages, and sign all the pages. also do not forget to sign the Form N1 as well.
Collate the forms and take them to the Court, along with the required fee.
(That can be paid in cash or as a cheque).
The Court will then issue the Documents for you.
Mar 16, 2016
Get three copies of each document, i.e. the form N1 X 3
the Particulars of Claim X3
(The third copy is for yourself, you will get the second copy back form the Court to your address with a Claim Number and the Court Seal (stamp) showing that it has been issued and through which Court (as stated in your Particulars of Claim).
This sealed copy will give you the date that the Court have deemed to have issued the Summons to the (now) Defendant. It will give you also the date when the summons will deemed to have been "served" (a Court term), and then the Defenant (the person who owes you the money) has 14 Calender days to reply to the Court stating whether they dispute the claim, and the reasons why (what in legal terms is known as a reply and defence).
Mar 16, 2016
It is up to you to agree with defence or ask for it to be "set down for Arbitration" (that is automatic on all defences under £5000)
Both the Defendant (debtor) and yourself would then be required to meet at the Court and a member of the Court Staff who is authorised to hear these matters will sit you both down in a room and go through your particulars of Claim. The Defendant will have to explain why your claim is not valid. A decision will then be made.
The Defendant will then be required to pay the money to you, if the Arbitator agrees that you are entitled to the money. He could do that across the table, in cash (do not accept a cheque) and at that point the summons "dies". However, if the other party does not pay on the spot you can ask the Arbitrator (as they are known) to "Enter Judgement Forthwith".
Mar 16, 2016
In your instance, this seems to be a straight forward case of default so I doubt whether it would even get to the stage mentioned in the last paragraph. In all likeliehood the Defendant will admit the debt and pay you under the Judgement, and pay you both the monies outstanding including the Costs of issue of the Summons, which the Court took from you when you issued the Summons.
If not then the Clerk will then go to the Court Office and either give both of you a printed copy of the Judgement, and the terms of payment
Mar 16, 2016
You now hold an enforceable Judgement which is registered at Court and details circulated to the Credit Reference Agencies. This now puts your debtor in a difficult situation as he is going to find it hard to get Credit from sources such as banks and other lenders. At least he will pay a premium rate to borrow in the future.
If the Defendant fails to pay within the terms of the Judgement, you can enforce it 14 days after the Judgement was entered. You will do this with what is known as a "Warrant of Execution".
Mar 16, 2016
Again, you will put the Court and Claim number in the boxes provided, and the address where you want the bailiff to go to and collect the money, or seize goods to the value of your claim.
Enter the amount that you want paid in the demand box for the warrant to be issued. (dont forget to include your interest) and then send /give this to the Court with the Fee.
The debtor has 14 days to pay the Warrant in full either to you or in to the Court to settle the Judgement.
If not the Bailliff with then go to the address you instructed him, and he will recover the money either in cash, or (as it is referred to ) "Levy" on goods which would cover the cost of all fees including your warrant, the Judgement debt (which already covers you issuing fee).
Mar 16, 2016
Once he has "levied" those goods cannot be sold or disposed of by the Defendant. If he does, he is in contempt of Court and can be summmonsed to appear and face a fine from the Court.
The Bailiff will arrange for the goods to be taken away to auction and sold. The proceeds of the sale with then be sent to you by a special cheque called a Payable Order. That is a cheque drawn on the Court so it cannot "bounce".
Once all the monies have been collected under the Judgement, it is deemed to be "Satisfied" ( and I hope you too -:) )
Mar 16, 2016
The Debtor then has to apply to the Court for a document known as a "Certificate of Judgement" which will cost him £15.00 and that is evidence that the matter is closed. The Credit Referecne Agencies will be updated by the Court.
A Judgement although "satisified" stays on the Court and Credit Reference Agencies' books for six years after the settlement date. Again, this will affect the other persons ability to get Credit, or again pay a premium rate.
I wish you every luck in your endeavours and do not be put off by my extensive detail as the process is a lot faster than you think.
Regards
Chris R
(A pity mosaic hub does not allow long answers
Mar 15, 2016
The first thing you should have done is to get a MOM duly signed and witnessed which will hold up in a court of law. Even now, its not too late,
You should call up your opposite number and ask for a meeting, to settle the dispute. In the meeting, get an idea about where the company thinks they are and where you stand. Get a MOM duly signed. A MOM is feasible even if both of you disagree about everything. At least, you have a paper record saying so.
If the company management is dynamic, they will want to settle. Maybe the big boss is not aware of the situation. It also depends upon the type of company. But no company will say no to a meeting to settle the dispute as otherwise they will look bad.
Do that and then just follow the steps in the MOM. Put in concrete dates or weeks as deadlines so that the company cannot afford to forget all about it. And, practice a solid answer for the 2000 pounds you let off. That is bound to play a major role as it is slightly less than 50% of contract value.
All the best
Mar 15, 2016
Ali's advice is very good. First and foremost, you must collect all documentation you have - notes, phone call records, days arriving at the site, correspondence with suppliers. receipts, etc. Second prepare a time line with notes as to the events as they played out to the best of your understanding. You will need all of this whether you engage an attorney, or seek payment through a small claims court. Make known to your client that you have assembled such documentation that you consider to be irrefutable evidence of the agreement, expenses and debt owed for such. Request a date payment will be made, terms, and remind them of the previously agreed terms. State that should payment not be completed as agreed you will seek legal recourse. Small claims court can probably get you most if not all of your payment without having to hire an attorney. An attorney may ask for some money up front but in general the prevailing party gets their attorneys fees paid by the losing party.
That is my advice, this is my experience: I had a client once who owed me a rather large sum of money (just over $80,000) for work that they agreed had been performed as agreed. They were a much larger company and had delayed payment for several months. I finally printed 200 flyers up that read, "Employees of (Company), is your company in financial problems? MY company has been owed payment for services performed for many months and I am concerned for my future and yours. When a company cannot pay their bills, are the employees next?". I went to the work site and handed them to the employees as they arrived for work. Most employees did not understand why I was doing this, but after handing about 20 out I had an invitation to meet with the CFO. 10 minutes into the meeting with the CFO I had a check for the full amount and a NDA, which I signed. Sometimes you must appeal to a higher power! Hope this helps.
Mar 15, 2016
You have learned a valuable lesson. Unfortunately, without anything in writing (an explicit contract), there is very little you can do (without great additional expense and time on your part).
Best recommendation is to design a Contract Template right now - and commit to using it going forward. Create your contract with the mindset that you will hit some problems on this project (with materials, weather, subcontractors and even payment). Try to cover those typical issues as clauses and contingencies in your contract.
If you create a detailed Contract Template - then you can customize it per client (assured that you have covered all the important issues). If new issues come up - add those clauses to your contract template so it will be covered in the future.
Mar 15, 2016
It's under £5,000, so cancel the credit note, get the right documents and file in the small claims court.
If they want to fight it, they may need to engage a solicitor and if they have any sense they will clear the debt or negotiate part payment.
I would be far more concerned about the damage to reputation which their behaviour imlpies and would get it confirmed and proven just how the problem was your fault.
Mar 15, 2016
Actually, Ali has outlined everything beautifully, so follow it to the letter and you should at least get some recompense. If you don't you'll get your day in court.
But don't let it happen again. If nothing else, if they don't have a contract, draw up a general one yourself that they must sign before you take on any work.
Mar 14, 2016
While this won't apply in all cases, and may not apply in your geography, in Canada it can help to use a paralegal - they're less expensive than a lawyer, and for "small claims" of up to a certain size they can help sue for breach of contract, etc.
Mar 14, 2016
First of all, never let it happen again.
To prepare yourself for what you must do, watch this video, every time you even have to think about not getting paid:
The most popular CreativeMornings talk of all time, Mike Monteiro gives us some valuable advice on how to get paid for the work that you do.
https://www.youtube.com/watch?v=jVkLVRt6c1U
Then, take a deep breath and then, watch THIS one, I prescribe it once a day as long as intolerable conditions persist:
https://youtu.be/92i5m3tV5XY?list=PLSqAnkfbFfCaFI30AXVBVeqmVLOw79seV
Then never work again without a contract. Never. Get your terms and conditions drawn up, maybe with a lawyer's help, and get any and every change to original terms in writing. You can make it easy by sending them change orders, for their acknowledgement and approval.
I'm not sure how things are in your location, but surely repairing a leak doesn't guarantee that it will never leak again, ever? You're going to want to get some form of sign off on a job that it is accepted as performed, but it sounds like they waited too long before finding fault with the work you did. If it were me, I would lawyer up.
Mar 14, 2016
...as others have stated, not having signed a contract is not a great beginning but it is also no guarantee that you will be paid either. Mixed bags contracts are but they do set expectations all around. Enforcing is another matter unfortunately.
Previous advice about sending a letter is very sound. Include dates, phone numbers, names, email addresses, what was discussed, what was the proposed action and what actually happened. Keep it as precise, clear and short as possible. Do not put in any emotion or opinions. Just the facts.
In a court of law, judges want to see evidence, not stories or what you thought was going to occur. The more information in a letter the better. I've done this numerous times over the years with banks and financial institutions regarding personal matters and have always had good results.
Proper grammar and spelling count too!
Good luck.
Michael
Mar 14, 2016
What country are you located in? I assume the UK? If you were in the states I would take the culprit to small claims court.
Mar 14, 2016
Look at the invoice and cry. Real tears.
I've done that before and it works pretty well. Mine was a similar $4,500.
Hope it doesn't hurt you too bad.
Mar 14, 2016
I always looked at something like this as an opportunity to resolve an issue and hopefully keep contact with a customer.... My view is you need to meet face to face, after 1st outlining in writing, special delivery your thoughts on your mistakes, what you tried to do to correct it, and ask them why did all the work I/we performed not given proper recognition, both personal and financial. Giving them a $2000 credit without further discussions could be viewed by them to be arrogant and self serving, without asking them for their view and documentation on lost revenues profits and increased costs....
Worst that could happen is your out the money-----but I would try to meet with them especially if more business under trusting conditions can be obtained....
Mar 14, 2016
Hello Daniel ~
While I am not familiar with UK law, I will tell you that here in the States, having a signed contract is no guarantee of payment. The only time in my long career as an entrepreneur that I could not get final payment from a client, I HAD a signed contact! After numerous attempts, both by email and phone, I decided to turn the account over to a collection agency. They agreed to take the assignment, and I agreed to the 60/40 split (60% to me, 40% to them) when they recovered the payment due. Yes, it's hefty, but much better than 60% of nothing. This took place in 2011.
I followed up with the collection bureau every few months for about a year, and they were having no luck. Finally I just let it go, and moved on, figuring they did their best.
Last month, I received a call from the collection company CEO, stating they had recovered the money, and wanting to verify where to send my check. Five years later! I was floored, and impressed with their diligence. So if this is an option for you, based on my experience I would definitely recommend finding a reputable collection agency and letting them handle the matter from here.
Good luck!
Mar 14, 2016
As Steven stated A lesson to be learned. Especially in construction any deviation from the contract (time, material, work) have a senior person signoff acknowledging event before work is to be done or materials delivered. They should also sign off on the scheduled milestones or percentage completed / delivered.
Mar 14, 2016
Hi Daniel
Sorry to hear about your problems, which I regret to say is all too common.
Firstly, you need to be aware that the law expect everyone to behave in good faith and be reasonable. So keep your cool (you have been patient already so good on you). Secondly remember you have a legal issue and not an accounting issue. You need legal enforcement rather than sending invoices or credit notes, so you need to get legal advice and not accountancy advice.
First the good news. Under English law verbal contract is just as valid as a written one. English law is almost unique in this as most countries require a written contract. The second good news is that English law allows for “pretext” (namely intent) even when you have a written contract. This means even if you have a written contract, if you could demonstrate the other party set our to defraud you (pretext) or had no intention of performing under contract (pretext or intent), you still will have a case based on “Pretext”.
Now the bad news!
Litigation is expensive in any country, so I pass on my lawyer's advice to me in the past which is “A bad out-of-court settlement is better than a good court judgement”. This is based on costs of litigation and even when you win the cost of enforcement.
My suggestion is to only communicate with them in writing. If they call you ask them to put whatever they say in writing, and if they do not, you write to them and confirm what was said in the conversation (always using recorded delivery). This is the start of building a written contract which will form basis of your future claims.
Secondly, send a “Without Prejudice” letter by recorded delivery outlining your claim and case to their Managing Director (not their accounts department). Explain in chronological order the events, work carried out, etc. but be careful not to come across as bellyaching! When you own your own business and people owe you money it is hard to stay unemotional and not allow the emotions get in the way. So be factual with dates, times, your work, etc. The judge will not care if you had to go without lunch one day because the delivery was late, but he considers the fact that you had to stay on-site for 6 hours waiting for materials and you could not leave to go on to another job (fidelity and duty of care). If that was the case, do record the name of the person that told you “Wait stuff will be here in 30 minutes”. It is important to show traceable and verifiable events. Do not worry about “they will deny it”. There are very few people who will lie blatantly under oath in a court no matter what they say when they are outside of the court and bravado.
Also mention that you have never received a complaint about the quality of your work or the failure to carry out any work that was requested so you assume the reason for non-payment is either their financial difficulty or clerical error. Tell them you would appreciate a timely settlement of the attached invoices.
At the end of the letter, give them an opportunity to make a formal settlement or counter offer within X working days (14 days is very reasonable).
If you do not hear from them, send them the second letter giving them the date of the first letter, and inform them you will take legal action within 7-days if they do not respond with a settlement offer. If they do not respond, speak to a lawyer and ask them to send them a legal action notice (should not cost you more than £100-£150). People take more notice of a letter from a lawyer. If all else fails, you will then need to discuss with your lawyer if you should go ahead with action in “Small Claims Court”. You can do this as the money owed to you is less than £5000. You can file a claim and represent yourself in small claims court but you could ask your lawyer for costs if you prefer them to do it. This is the cheapest legal avenue for debts under £5000.
Good luck and remember next time get a contract signed. Much cheaper and easier to take action in small claims court if you have a signed contract as it is simply a “Slam & Dunk” then! Also, when you spot any sign of problems or suspect "This is going to go pear shaped", make sure to go into writing and on the record.
Mar 14, 2016
Ali, I was about to comment when I read Ali's response. He is absolutely right. Follow his advice and you'll get a better outcome. And, learn the lesson..we all have. Get everything in writing. Don't do any work without formal written approval, even if it's an email and establish your fee, how you charge and payment terms up front.
Escalate early, don't get emotional. Stay factual and you'll stand a better chance of getting some, perhaps not all of your $$ back.
Also, know that you are not the only one they are treating that way. Others will be having similar issues.
Jaqui
Mar 14, 2016
Without an initial signed contract outlining how you charge and what penalties will be applied for the example you mentioned, you are in a difficult position to bill like you have. If they don't have a willingness to pay and acceptance for what you are billing for you will be down to trying some persuasive mediation or legal action if advised to be viable. Lesson be learned you need to stipulate the full deal in writing prior to any work being undertaken.
Have you spoken to the Head Office, or office responsible for payment of invoices to request payment?
If not do so, and send a follow up letter to confirm the phone call, and for good order send a copy of both the original Invoice and other Credit Note, demanding payment. Also in that letter confirm that they have not called you back to put any further work right
Ideally send it recorded delivery, addressed to the "Bought Ledger Manager" at the Head Office, better still if you have a copy of their letter head, as a Limited Company, they must put their "Registered Address" at the bottom. That in law is called a "point of service", and sent the letter there.
: