‘I’m coming to the end of a 6 month contract with a small local agency. All has gone OK, although the agency has become slow in paying me. I invoice weekly. At the beginning I was paid after 10 days, but now it’s more like 2 months – I have 9 invoices outstanding. When I chase the agent he says his cheque is in the post – but it doesn’t arrive. There’s nothing in the contract saying when invoices have to be paid.’
I’d say things were anything but OK. What any contractor needs, first and foremost, is to be able to focus 100% on his/her work, without having to worry about getting paid on time – or, for that matter, at all!
The contract doesn’t specify a period of credit or say by what date your invoices will be paid. There are two possible interpretations. First, that since no period is specified, no credit is to be given – and so each invoice is due for payment on delivery. Alternatively, that it is an implied term that payment will be made within a reasonable time. Either way, you have to take the initiative of acting. Where a contract provides (whether expressly, or by implication) that something is to be done by a certain date or time, then one has to form a view of how serious a failure to do it by that date or time is. One has to form that view from the contract as a whole. The starting point will be that a failure to do something by a date specified in the contract will not be a sufficiently fundamental breach to justify termination without warning – unless the opposite is clear from the contract itself.
So the first step has to be to ‘make time of the essence’ (ie, of the contract). No particular magic form of words is needed, just put in writing the number and amount of invoices outstanding, outline the increasing delays in payment you have experienced (and the excuses and lies!), and state that you require all outstanding invoices to be paid within 7 days, and that future invoices be paid strictly within 7 days. Say that if he fails to comply with this, you will regard yourself at liberty to terminate the contract without notice for their breach. That then spells out what you require, and puts you in a position where if he fails to comply, then you should expect to be able to lawfully terminate the contract, and be released from any further obligations on your part in it.
At the same time, you should involve the client. Let the client know the position, and provide a copy of the letter. It is quite possible that the client will be willing and able to bring some pressure to bear on the agency to get payments up to date.
Now, what happens if the seven days go by and you remain unpaid? This is where you have to take hard decisions. If you terminate the contract, then you may think it will be harder to get money out of the agency than if you did not terminate. And maybe it will seem that way. But ‘if you find yourself in a hole, the first thing to do is stop digging’. You know very well that each week so far has ended with you being owed more on Friday than you had been owed on Monday. The simple fact probably is that the agency does not have the money to pay you. And whether that’s a result of bad management, or of spending it elsewhere, it’s a harsh fact that all the courts in the world won’t conjure up money that isn’t there to pay you. Certainly you may take legal action against him – but as many before you have found to their cost, getting a judgment is one thing, getting the money is often quite another.
Assuming you have terminated, then it is fairly clear that the restriction in your contract which prevented you from going direct to the client will no longer be binding on you. The client may of course have a similar restriction in their contract with the agency, but the agent will probably be in breach of that contract too because, as a result of your termination, your services are no longer being supplied to the client.
There are clear lessons here: first, establish clearly with the agency at the outset exactly what credit terms are being given to them, and when your invoices are to be paid. Secondly, consider carefully the reputation of the agency you plan to work through. Thirdly, and most importantly, I have no doubt that you are performing your part of the contract scrupulously; you are entitled to expect the other party to do likewise. Keep a close eye on payment, and if anything becomes so much as a day overdue, treat that as a warning, and act on it straightaway. Put your concerns in writing so there is a record, and so that time of payment is made of the essence of the contract. Whatever you do, do not simply hope things will get better if you sit back and wait – chances are they won’t, and you’ll simply go on working, increasing the debt yet further, and without any reasonable prospect of getting paid.
Fine, if you like working for nothing. But at least be aware that’s what you’re doing!
30th April 1999
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
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