Being a business owner means that making agreements and signing contracts can be a regular occurrence. These formal agreements protect your business and ensure that suppliers, business partners and even customers uphold their end of the contract.
The clauses these contracts form the backbone of a business's operations, covering the supply of goods, delivery of services, timeframes for completion and when payments are due. As such not complying with any of the conditions in a contract will often lead to a dispute.
When a party fails to fulfil the terms and conditions in a written agreement, without a lawful or valid excuse, this is referred to as a breach of contract and you must decide how to deal with the breaking of the agreement.
But before you start filling out the court forms, a first step in dealing with a breach is to formally advise the other party with written notice, known as a 'Letter of Claim' or 'Letter Before Action'.
What is a Letter Before Action?
A Letter Before Action is the starting point of many forms of civil legal proceedings and basically sets out your legal claim. It's important to keep in mind that while a Letter Before Action is the first step in taking formal action, it should be the last step in trying to deal with the issue informally.
Calling in lawyers and involving the court at the first inkling of a problem usually won't be helpful. If an aspect of a contract hasn't been complied with or is outstanding, then a polite (but firm) enquiry to the other party on the reason and how they intend to resolve the should be your first act.
Then if informal discussions don't start the process to resolve the issue, sending a Letter Before Action is often a low-cost route to opening a dialogue with the other side to achieve a resolution.
What should a letter before action contain?
Background and context
The letter should start by referencing the specific contract or agreement that has been breached, when it came into force and what it covers. You shouldn't assume that the person who deals with the letter is aware of the existing business relationship and that an agreement in place.
Circumstances and facts
Briefly explain what has occurred and how it is considered to be a breach of the agreement. Ideally point to a specific obligation or clause in the contract and how this obligation hasn't been met. If the failure has resulted in a loss or damage that can be calculated, then this should also be included.
Remedy and resolution
State how the breach can be remedied and how the matter can be resolved to your satisfaction. This resolution will be down to the type of agreement and specifics of the breach, but could involve immediate payment of an outstanding amount, the return of a supplied product, cancelling of a service/contract or a monetary payment to cover a loss.
Timeframe and response
A reasonable period should be given for the other party to comply or at least acknowledge and respond to the letter. A timeframe of at least 14 days would be a minimum, and you also need to comply with any reasonable requests for additional information.
Consequences and legal action
Finally, the whole point of the Letter Before Action is to set out your claim and place the other party on notice that a failure to act could lead to you starting legal proceedings. This should be stated in the letter along with highlighting that you will also be looking to recover any additional costs that are involved with court action from them as well.
Legal Advice with a Breach of Contract Letter.
Before starting down the path of court action, it's always advisable to seek some initial legal advice. While the breach may be an obvious one, a contract dispute lawyer will be able to advise you on your prospects, how any damages would be calculated and what legal proceedings may cost.
Importantly they can also draft your Letter Before Action ensuring it accurately represents your claim and that it complies with the court's Civil Procedure Rules and Pre-action Protocols.
A well-researched and professionally drafted Letter Before Action is your best chance of achieving an early and cost-effective resolution to a contract dispute, so it's well worth getting a solicitor involved from the outset.
When you are owed money, hindsight can be a wonderful thing.
All too often in the rush to complete a business transaction or lending money to a friend in need, you won't think to put in place a legally binding agreement that formalises the arrangement beforehand. After all, you have every intention of holding up your end of the deal and so assume the other party will too.
But if payment doesn't happen and your deal starts turning into a dispute over what is owed, you may need to consider what legal avenues are open to you to get your money back.
The success of any legal action will then depend on what evidence you can provide to show that the debt is owed.
Can you take someone to court for owing you money?
Yes, but the 'burden of proof' will be on you as the Claimant to show that the amount you are claiming is due. Court should be your last resort in attempting to recover your money and so you should be confident that you have a strong case, sufficient evidence and follow the set pre-action procedure prior to issuing a claim (e.g. sending a letter before action, attempting mediation etc.)
Ultimately the decision on who owes what will be down to a judge's ruling based on:
Owed money but no contract!
In the absence of a written contract or agreement being in place, there are various other pieces of information that you may be able to secure which can provide evidence that the money is due.
Bounced cheque or returned direct debit
While the use of cheques is diminishing, hundreds of millions of cheques are still issued every year. If your debtor has sent you a cheque that bounced or agreed to a direct debit that has been returned, it is often all the evidence that you need to prove a debt is owed.
In law a cheque is considered a 'promise to pay' and so can be used as a clear admission that money is due.
Most businesses use invoices to request payment so providing copies and proof of them being issued to a customer or supplier will go a long way in proving that a debt is owed, even if they aren’t directly attached to Terms of Business or a contract.
Furthermore, if you provided regular statements of the amounts owed and showing overdue, then these will also be useful evidence.
Evidence of chasing debts
Once a payment is overdue you will have hopefully contacted the person or company to chase the debt.
Emails, letters, texts or messages exchanged on social media (Facebook, Twitter etc.) can all be used to help prove a debt is owed and overdue.
If the other party has responded to you apologising or asking for more time, then this admission will be extremely valuable in proving that they don't dispute that they actually owe the debt. So, it's important that you save or screenshot these messages in the event they are needed.
Loaned money without a contract
Without an I.O.U. or a loan agreement in place, proving that money provided to someone was a loan that needs to be repaid can be difficult. This is because often money given to friends or family is considered a gift and so isn't required to be paid back.
Enforcing a verbal agreement that money is owed will hinge around providing evidence to show that the cash was transferred as a loan along with any repayments e.g.
Witnesses to the arrangement
When little or no documentation exists to prove a debt, having an independent witness to a verbal contract can be invaluable.
For example - with a business transaction, did an employee take the order over the phone, deliver goods or perform a service where payment was verbally agreed with the customer? If money was lent to a friend, was another person present to witness the agreement of how/when they were going to pay you back?
But even if an independent witness isn't available, you as a claimant can also present your version of events to the court in a written witness statement. Any witnesses may then need to attend court should the claim go all the way to a hearing.
Debt disputes with no contract.
Without a written agreement, there should still be plenty of information that you can pull together to prove what you are owed. However, if the other party disputes the amount, or that any debt is owed at all, then you may have a fight on your hands that needs to be settled in court.
It will then be down to the evidence you can gather and how your claim is pleaded to convince a judge that you are entitled to the money owed in the absence of a legally binding written contract. So, obtaining legal advice on the evidence needed for a debt recovery claim and your prospects should be your starting point.
Receiving a letter from solicitors informing that someone is making an injury claim against you can certainly have a negative impact on your day.
Depending on the circumstances of the accident, you may be confronted with a Letter of Claim or a Claim Notification Form which set out full details of the alleged incident and injuries. But no matter what correspondence you receive there will be strict response timeframes set that you will be told you need to abide by.
Often the first reaction to this letter is one of worry, as you may not know how you are going to respond to the claimant solicitors, defend the claim or even pay the compensation.
However, the good news is that the vast majority of claims are usually covered by some kind of insurance policy and we're going to explain the scenarios where insurance may cover the claim well as your options when no insurance is available.
Defending Road Traffic Accidents.
As it's a legal requirement that you must have at least third-party motor insurance to drive on UK roads, the claim is likely to be fully covered by your vehicle insurance. While it is likely your insurer has already been notified of the accident and subsequent claim, your first action should be to advise them of the solicitor documentation you have received.
One important item to remember is that not having the optional 'Legal Expenses Cover' on your policy will not stop your insurance company acting to defend a claim made against you. Comprehensive, fire and theft and third party insurance should all provide sufficient cover to defend the claim against you.
When you report the claim, you will almost certainly be asked about the accident circumstances, vehicle damage and any evidence you have. This will be used to establish liability (fault) for the accident which will determine how your insurance company handles the claim.
Your insurer should then deal with the matter from this point forward including complying with the various deadlines and disclosure requirements. If the case gets to the stage of court proceedings, then your insurer will also appoint a solicitor to defend the case who may also want to discuss the incident with you.
There can be instances where your insurance company refuses to cover you or when you don't have suitable insurance in place for a road collision (i.e. a cyclist injures a pedestrian). In these cases, the claim may be dealt with by the Motor Insurance Bureau who handles uninsured driver claims or you may need to seek your own representation.
Injury Claim by an Employee.
If a member of staff is making a claim for injury, usually your Employers' Liability Insurance will cover your business' legal costs to defend the claim, as well the payment of any compensation that is ultimately awarded.
Often the Claim Notification Form from the claimant will specifically request your insurer's details and instruct you to pass the documents on to them. Once this is done, your business insurer will begin investigating the incident and appoint one of their panel solicitors should it become necessary.
For most businesses that have employees, this type of insurance is compulsory under the appropriately named Employers' Liability (Compulsory Insurance) Act. However, there are some exceptions where employee insurance isn't mandatory such as:
If an injury claim is made by an employee and no appropriate business insurance covers the claim, then you will need to seek legal advice as soon as possible. There are various 'pre-action' steps and deadlines that need to be met and failing to comply with them can have a significant impact on the cost of the claim.
Injury Claim by a Customer or Member of the Public.
Unlike other types of insurance, taking out Public Liability Insurance is optional for a business. If in place, it will cover your business premises when customers visit you as well as if a member of the public is injured during the course of your work.
While Public Liability Insurance covers you for day-to-day business activities, it often doesn't cover you for injuries caused by a product you have manufactured or supplied. For this Product Liability Insurance is often required.
So you will need to consider which of your insurance policies applies to the circumstances that allegedly caused the claimants injury.
If your business has a suitable Public or Product Liability Insurance policy the claim documentation can be passed on to them. As with Employers' Liability Insurance the policy should cover legal fees to defend the case along with the payment of any compensation that is awarded by the court or agreed in settlement by your insurer.
However, as Product/Public Liability Insurance isn't mandatory and there can be various exclusions depending on the policy purchased, it is the area where we see the most claims that need to be dealt with on a private basis.
Injury Claim Against a Homeowner.
If someone has been injured whilst lawfully on your property or in your home, then your Home Insurance may cover the cost of the claim depending on the accident circumstances. The 'personal liability' or 'liability to the public' section of a Home Insurance Policy often covers the owners and occupiers if they are held responsible for an accident that occurs in or around the property.
Some Home Insurance products even provide cover for policyholders away from the property, so it is a policy always worth checking.
There can however be many exclusions to Home Insurance liability cover, so you will need to consult your policy and speak to your insurer about whether a claim is covered. Common exclusions may be:
I've a personal injury claim against me with no insurance....
After you've exhausted the potential insurance policies that may indemnify you, you may find that you're on your own in dealing with the claim.
At this point it is critical to seek a personal injury defence lawyer who can advise you on how the claim should be handled. They can review the circumstances around the injury, provide a professional opinion of the prospects of the claim and advise on the potential next steps.
Even if you don't wish to defend the claim and want to admit liability for the accident, a defence solicitor will still be able to make sure a suitable settlement is reached with your best interests in mind.
Catalyst Law are team of legal professionals with over 20 years' experience helping businesses and people with their legal problems.
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