You’ve done the work and everything was completed as required in your contract. Yet your invoices are ignored and your calls unanswered. So what can you do when a company you’ve done business with refuses to pay when it is clear they have breached the contract?
Whether you have not received payment for services rendered, of if you are rent under a commercial lease or have not been compensated for other business debts, certain procedures generally need to be followed. Failing to do so can have unforeseen and adverse ramifications. And while some cases end up in court, the law generally requires that certain methods of debt collection must first be exhausted in that the parties should first try and resolve their dispute before going to court.
The first step in the process is to send a Letter of Demand. This letter must be crafted in a certain manner, including specific information. The Letter of Demand should among other have the date of the demand, total amount of the debt, original due date, deadline to receive payment, a description of the debt, along with any written documents that back up your claim, such as invoices, contracts, signed proposals or emails agreeing to the deal and should spell out the consequences of non-payment. It is also important to include language that makes it clear that you are prepared to take further action if your demand is not complied with.
A Letter of Demand can be used for both liquidated debts (in a specific amount) or a demand for the payment of damages (provided particulars are given). Note that time limits can vary by state. For example, in New South Wales, debts can be collected for up to six years after the date of the breach as a general rule.
Once the letter is crafted, it must be sent to the debtor preferably at its registered business address. Options include registered post, email or even hiring an independent service company to serve the letter in person. Whatever is chosen, it is imperative that there is some form of proof of delivery. This is essential if further legal action becomes necessary down the line.
When sending a demand, it is typical to give the debtor 14 days to pay the amount due. If they do not respond, it may be necessary to send follow up. If payment is still not received after a reasonable period, then more serious steps need to be considered.
For example, if the debtor refuses to engage then it may be necessary to consider a range of options including: sending a statutory demand or even formal court proceedings be commenced. If a defense is not filed default judgement could potentially be an option.
Because of the complexities involved in the collection of debts, companies may want to consult with commercial litigation solicitors for help from the get go. At Litigant, we have advised countless clients in the Sydney area through process of getting back what is owed to them. If you’d like to get more information or book a consult, call us at +61 2 8644 0663.
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