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What Options Does Your Business Have if You Have Not Been Paid by a Customer or Client?

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As a business owner, you spend a great deal of time and effort providing services, labor, materials, and/or equipment to complete a customer’s project. You expect to be paid for your services and it can be devastating to your business if you are not paid. Unfortunately, in today’s world, payment disputes are becoming very common in every industry. As a business owner, what can you do to obtain payment for the money that you are owed?

1.)    Send a Demand Letter

You are likely more interested in growing your business and providing quality work than spending hours on email and the phone calls chasing down payment. Sending a demand letter can be an effective way to put the other side on notice that you are serious and intend to invoke your rights. This begs the question: what is a demand letter?  This short letter lays out the facts, makes a specific demand for payment, and in more serious cases threatens a lawsuit. Hiring an attorney to draft and send a demand letter on your behalf invokes an extra level of seriousness that you are aware of your rights and intend to be compensated for your hard work.

2.)    Mediation or Arbitration

Litigation is expensive and is generally a last resort for many parties because it takes away from what you are owed and can potentially hurt a business’s reputation. Sometimes mediation or arbitration is the better way to end a conflict. Mediation is generally a more informal process whereby the mediator obtains relevant information and assists the parties in reaching an agreed upon outcome. Whereas arbitration is more formal, allows each party to present their case, and renders a legally binding decision that can be transformed into a judgment. Depending on the nature of your business and type of services you perform, adding a mediation or arbitration provision into your contracts may be a useful tool.  However, it’s not always the best option so speak with an experienced attorney before deciding whether to incorporate these provisions into your contracts. 

3.)    File suit for Breach of Contract

Sometimes litigation is inevitable, and you will need to file a lawsuit and go to Court to resolve the dispute. This form of dispute resolution is lengthy, costly, and often becomes very complex. However, sometimes it is the only way to assert your rights when dealing with a party unwilling to negotiate and furnish payment. We typically recommend exploring alternative avenues before filing a lawsuit; however, you must be prepared to launch a Court battle if necessary. 


The biggest mistake that we see is the absence of a written contract.  It is essential that you conduct business with a written contract.  REMEMBER, it must be a well written contract with provisions that are drafted to protect you and your business.  Not all contracts are good contracts.  Make sure you have a well written contract that provides you with the right options and best chance to recover your payment in the event of a dispute. 

McCormick Law & Consulting assists many entrepreneurs and business owners to avoid, resolve and litigate disputes in your business.  We are here to assist you in developing the right course of legal action to protect your business and seek the best outcome possible.