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CREDITORS’ RIGHTS AND REMEDIES Dealing with unpaid accounts
By Jonah Waxman, Litigation Associate at Lawrence, Lawrence, Stevenson LLP
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usiness relationships are built on trust. While handshake deals may no longer be the norm, the expectation that each party will act in good faith to fulfill their respective contractual obligations has only become more entrenched as written agreements have become more commonplace. What, then, is to be done when one party attempts to avoid their contractual obligations? We might narrow our focus to situations involving customers who have recently refused to satisfy their accounts for services rendered. Perhaps you’re a company that has done work for this customer time and again, with only this recent invoice being met with empty promises to pay while they plead for accommodations during difficult times. These examples are only becoming more ubiquitous in the context of the COVID-19 pandemic, which has 14 WOOD INDUSTRY SPRING 2022
disrupted businesses and business relationships alike. Early and timely communication, setting out each party’s expectations, is critical to mitigating against this unfortunate situation. A clearly defined contract, which has been vetted by both parties (and their respective counsel), might set out in detail a customer’s obligation to pay even when times are difficult, and what interest is owed in the context of late payments. Another potential way for the company to clarify its expectations is to bill regularly, and not send sporadic
accounts. The former prevents the customer from feigning surprise, either by the bill itself or by an unexpectedly large amount (which could have otherwise been delivered more frequently in smaller sums as the project developed). This has a further practical advantage: delivering regular accounts may alert you sooner to issues with payment, thereby preventing your company from investing money into a customer otherwise unable or unwilling to pay for services rendered. Should the need arise to commence collection proceedings, there are two primary legal considerations that you’ll want to consider: 1. Why has the debtor refused to pay? 2. How long has the debt been outstanding? Both would have implications for the merits of your claim. As soon as the situation arises, you should consult with a litigation lawyer who specializes in debt
