Obviously, it's not an ideal situation. However, the simple fact that the customer didn't sign anything isn't a valid excuse for them not to pay up.
What's the legal situation?
While a signed contract is the most robust form of agreement, other types of agreements can also hold legal weight:
Written Agreement: Communication through emails, texts, or messaging apps like WhatsApp can sometimes serve as a written agreement. For example, if both parties agree to terms in a WhatsApp chat, this may be enforceable, provided the conversation is clear, specific, and unambiguous.
Oral or Verbal Agreement: Contracts based on spoken words are legally binding in many cases. However, proving the terms may require additional evidence, such as witnesses or follow-up written confirmations.
Agreement by Conduct: An agreement can also be established through actions. For instance, consistent trading on the same terms over time (known as incorporation by a course of dealing) can form a binding agreement.
Having any form of agreement strengthens your case when pursuing payment. However, securing written terms, even informally, significantly reduces the risk of disputes.
What can you do to recover the debt?
In principle, the law is on your side. The first thing to do is to contact the customer and find out why the outstanding amount has not been settled. It may simply be a misunderstanding or an error. Alternatively, there may a minor issue which can be resolved easily. If the job has been signed off by the customer, make sure you have the relevant paperwork to hand when you make the call.
If the customer is withholding payment because of snagging issues, you should deal with these as soon as possible and get final sign-off on the job in writing.
What's the next step?
If you still don't receive settlement of the debt, the next step is to send the customer a letter, setting out the full details of your claim. This should include details of the verbal agreement you made with them for the work to be carried out, the date of this verbal agreement and where it was made i.e. on-site or via the telephone. You should also include a full description of what was agreed, the amount due, the original payment terms and a deadline for payment.
What about legal action?
If the customer still refuses to settle the debt, it's time to consider taking legal action. In some cases, simply sending a 'letter before action' and the risk of the customer receiving a County Court Judgment (CCJ) will be enough to do the trick. If not, you can proceed with court action or, if the debt is undisputed and over £750, you can petition the court for a winding-up order.
Why not get professional help?
Whether you're simply chasing an overdue debt or taking things to the next level with legal action, it can be a real asset to have the proven expertise and experience of a professional debt collection agency to support you.
At Redwood Collections, we have a strong track record of providing debt collection services for the construction industry. We’ll provide you with authoritative advice and guidance, as well as taking care of all the necessary debt collection procedures on your behalf, from proactively chasing the debt to handling all aspects of any legal action.
What's more, we pride ourselves on acting with integrity and professionalism to ensure that we protect your name and your customer relationships. With Redwood on your side, your business can Grow Stronger.
Email us at info@redwoodcollections.com.
