Disagreements are a fact of life. Most of the time people are able to resolve matters between themselves without turning them into full blown legal disputes. But unfortunately this isn't always the case, and matters can escalate when points of view are not appreciated or legal rights are felt to have been breached.
Decisions then have to be made about when to escalate matters and seek legal advice. However before issuing the war cry 'You'll be hearing from my solicitor!' take a moment, consider your options, and try to keep a few things in mind. Keep calm and carry on talking.
Whether your dispute is with an individual (such as a friend or family member), a small business (a tradesperson) or a large company, anger and stress won't help. Clouded judgement and impulsive action will usually only make matters worse and provide a bad impression of your reasonableness.
Keep focused on the specific issue and try to engage in calm and polite discussions with the individual or business representative. Tell them your problem, what action it will take from them to resolve it, and make sure you listen to their response or any alternatives offered. Use the correct channels as a customer.
Talk to the right person or department about your issue. For example if your dispute is about a faulty item you have purchased, then a manager or dedicated customer service representative will be better placed to help you get it replaced than a member of the sales team.
Likewise if you've had poor work performed by a tradesperson, then the customer service team or owner of the small business may be the most appropriate person to speak to. If you are not sure who to talk to, make polite enquiries until you find the right person. After these initial conversations if you still cannot get the matter resolved, ask whether there is a formal complaints procedure that you can follow. This may then reveal if there is an independent trade body, regulator or ombudsman that you can escalate your complaint to for resolution. Disputes with friends or family.
If a dispute arises between you and a friend or family member, there unfortunately won't be a dedicated complaints department that can help resolve the issue. However this doesn't mean you should move straight to legal action.
Often disputes between individuals relate to money being owed. In these cases you should remain polite and sympathetic in your requests for repayment along with being open to receiving payments in instalments or over a longer period of time. Should an agreement then be reached, you need to ensure this is documented in writing (messages, emails, text etc.) and further information can be found in our guide what to do when money is owed by a friend. Don't make threats.
Try not to talk about taking legal action, suing them, or dragging them in court until you have tried everything you can reasonably do to resolve the matter. Taking an adversarial approach at the very start may limit your options for a quick, simple and cost effective solution.
If an ombudsman does become involved in a consumer issue, they may recommend mediation to resolve the dispute which you should be open to. Keep a record of events.
If matters do need legal action and in extreme cases have to go to court, you will need to provide evidence of the problem. So keeping notes, photographs, documents and anything else that is relevant will be important. This documentation will also help you demonstrate all you have done to try to resolve the issue before being forced in taking legal action.
Make notes of any conversations you have with the date/time and who you spoke to, also keep copies of any letters, emails or messages you have sent. You will be hearing from my solicitor!
If you have satisfied yourself that you have done absolutely everything possible to sort things out but have been met with no success, then it's time to contact a solicitor for legal advice.
If you have a solid case then quite often a letter from a law firm can bring surprisingly quick and positive results and won't cost the earth. But depending how far you wish to pursue the matter, it could ultimately end up in court which will take time and money (see our guide on how much it costs to take someone to the Small Claims Court). A solicitor will be able to advise you fully on your dispute, including your chances of a successful legal claim, the evidence that will be needed and what costs are involved. Knowing when to seek legal advice will help you in the long run, just don't take legal action first or in anger!
Comments
No matter what industry you are in, you can't conduct business on your own. So every business has to have various agreements, contracts and terms in place.
These agreements can be between you and your customers, employees, suppliers or distributors, and are usually formalised by writing legally binding contracts between the parties involved. Unfortunately, all too often when things start to go wrong we see businesses suddenly take an in depth look at their agreements only to find that they have an legally unenforceable contract or the agreement they signed doesn't cover what everyone thought it did. It doesn't matter what kind of formal transaction it is, whether it's an employee contract, partnership agreement, purchase order, or terms of business with a customer, the agreement must be recognised legally by the courts for it to be enforceable if someone were to challenge it. This is why it's important to understand the key components of a legally binding contract when drafting an agreement. Unenforceable Contract Terms.
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Legally binding contracts must include a 'bargain'. This is to say one party doing something in exchange for the other party doing something else; which is typically paying money.
But the exchange could also be exchanging services if money is not involved. The consideration has to be significant, but it does not necessarily need to be adequate. There is no law saying that a bargain must be of equal value, just that it must have some value. Insufficient consideration could be when a contract allows for one party to avoid damages for failing to fulfil their end of the bargain which isn't mirrored by the other party. |
Top industries for contract claims & disputesIACCM study on the Most Negotiated Terms & Conditions
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Unfair or Unenforceable Contract Terms
Another common example of an unfair term are 'penalty clauses' where one party specifies a monetary amount that is payable upon breach of the contract which is disproportionate to the loss that the party would actually suffer due to that breach.
Does an agreement have to be in writing to be enforceable?
Legally binding contracts do not necessarily have to be written agreements, with a few exceptions such as property purchases/sales, so there are many oral or verbal contracts made everyday.
However, you should understand that it is always best to have an agreement written down and signed by all parties. If not, you will be stuck with the burden of proving that the verbal contract exists and what the specific terms of the contract are. It is also more difficult to prove the 'intention to be bound' in an unwritten contract. This is why it is always best to put agreements clearly in writing along with being signed and witnessed, so there will be less room for interpretation should you end up enforcing the contract. |
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Worried about unenforceable contract terms?
Fixed Fee Contract ReviewHow to avoid unenforceable contracts & agreements.
Ensure a contract does what you think it does
It can be all too easy to assume that what was agreed verbally has been translated perfectly into a written agreement. Often this isn't the case, and a party can be caught out by relying more of the 'sentiment' or 'spirit' of what was discussed rather than what made it into the written contract.
Therefore take time to speak to a solicitor about the purpose of the business arrangement and then ask them to review the wording of the draft agreement. The solicitor will then be able to firm up your contractual position and ensure the contract is fair.
Add a Dispute Resolution clause
Inserting a dispute resolution clause into a contract defines how the parties will seek to resolve differences or misunderstandings before they turn legal. To avoid litigation, a dispute resolution clause can point towards independent mediation or arbitration to settle the dispute in a fair and mutually agreeable way.
But even if alternative dispute resolution isn't an option for your type of agreement. If you operate in the UK, checking there is a clause stating that the contract is governed by the courts of England and Wales will ensure that any legal action takes place in your local jurisdiction.
Proactively review your contracts
You don't want to be in the position of relying on a contract's wording before checking that it does what you need it to.
Businesses can invoice clients early, wait patiently for payment, send chase emails and be optimistic that payment will someday finally land at the bank.
But sometimes those polite little reminders, sending copy invoices and monthly statements are just not enough to deal with those customers who are adamant they are not paying.
So what can you do to ensure your business is paid the money it is owed? How do you collect debts from customers?
Choosing how and when you need to take formal action can be difficult and there are a few informal options at your disposal before starting legal action. After all, the last thing you want to do is spend time and money going to court for every invoice that is overdue by a few days.
But when you've exhausted the chasing letters and phone calls, we wanted to share our experiences and tips on how to collect debt from a customer, starting with establishing your legal position on the debt.
34% of UK Small to Medium Enterprises (SMEs) choose to write off thousands of pounds of bad debt every year.
Proof of the debt.
In order to take a debt claim to court, you need to have some kind of evidence that the debt amount you wish to claim is due. In most cases a copy of your invoice, bill or order will suffice, however generally you should have evidence of:
- the total amount that was billed and is now overdue for payment from your customer (i.e. you gave them a bill or invoice)
- proof that goods were delivered or services provided (i.e. delivery was made or the job was complete)
- previous informal communication with the customer making them aware of the debt (i.e. email or text messages chasing payment)
- formal advanced notification to the debtor informing that you intend to take legal action (i.e. a Letter Before Action or Letter of Claim)
With the above steps and evidence in place, you should be in a good position to start legal proceedings against the debtor.
However if the customer disputes the money is owed, for example because they believe the goods were faulty, you may need to take steps to investigate and resolve the business dispute before proceeding with formal debt action.
Legal help with non-paying customers.
But once you do decide to go down a more formal route to secure a payment you have a few options:
Option 1 - Submit a debt claim yourself
To make a court claim on your own you can use the HMCTS Money Claim Online service. It offers a process to recover the money your business is owed by walking you through the submission of an online claim and paying a court fee.
You need to be aware that these are court proceedings and so you should familiarise yourself with the 'pre action' rules along with what happens should you win your claim and receive a judgment. Ensure you read the associated Money Claim Online User Guide thoroughly before starting the claim process.
Option 2 - Hire a debt collector
When you hire a debt collection agency they will start chasing the debt and in some scenarios begin the legal process to recover it through the courts. You should bear in mind that debt collection agencies don't have any special legal powers beyond what you can do yourself. Generally a debt collection agent will also take a proportion of any debt that they are successful in collecting to cover their fees.
Option 3 - Instruct Debt Recovery Solicitors
A Solicitor should provide some general advice on the process and your prospects along with a fixed fee of what they will charge. If their fees are more than the money you are seeking from your customer, then you'll be better going with another route. However experienced debt recovery solicitors should have a fee structure which complements the amount you are wishing to recover and the complexity of the issue (i.e. it will be more complicated if the debtor defends the claim or disputes the debt being owed).
In the majority of debt recovery claims, the initial solicitor's 'Letter Before Action' often does the trick and the customer will opt to pay their bill rather than face court proceedings from a law firm.
If court action is needed a solicitor can explain the risks and advise on items such as recovering court fees and any statutory late payment charge that can be made. For example, interest may be able to claimed on top of the debt (usually 8% above base rate) via the Late Payment of Commercial Debts Act.
Need help on recovering a business debt?
Business Debt RecoveryYou may feel bad 'hounding' a customer about paying their debt or even getting a solicitor involved, but you shouldn't. You did your job and it is not your fault they have failed to pay you in a timely manner.
Being understanding to your customers while knowing your legal rights is what all responsible businesses should aim for.
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Catalyst Law are team of legal professionals with over 20 years' experience helping businesses and people with their legal problems.
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