Taking A Client To Court

Disclaimer: I am not an attor­ney, nor am I qual­i­fied to pro­vide legal advice. The below is based on my 15+ years pro­fes­sion­al expe­ri­ence as a graph­ic design­er and design agency prin­ci­pal. Use it as a guide­line. Before engag­ing in any legal action, con­sult a licensed attor­ney in your local jurisdiction.

As much as we try to avoid it with care­ful­ly gen­er­at­ed paper trails and invoice after invoice, inevitably it hap­pens to every free­lancer or agency. When it hap­pens it’s frus­trat­ing, offen­sive, and often fright­en­ing. It hap­pens in design; it hap­pens in every indus­try. The longer you stay in busi­ness, the greater the chances of it hap­pen­ing to you. At some point, a client will refuse to pay.

When that hap­pens, you have two options: Take the loss or take legal action. Which you choose is your deci­sion; you are the one who must live with the deci­sion. The first time you find your­self fac­ing this deci­sion, the for­mer option will seem a lot less scary than the lat­ter. Don’t let fear stop you from stand­ing up for your­self. If you pre­pare ade­quate­ly, if you under­stand your role in a law suit, the less fright­en­ing it will be as an option.

If tak­ing the client to court becomes nec­es­sary, hope­ful­ly your day-to-day inter­ac­tion with the client has already laid the ground­work for your case. First, you should have a con­tract (more about that in future arti­cles). Whether or not you have a con­tract always save every­thing. Save e‑mails, fax­es, FedEx slips, pho­to­copies of any checks or mon­ey orders, and any­thing else sent to or from the client. Hopefully you’ll nev­er need to use any of this mate­r­i­al to estab­lish in a court’s eyes the exis­tence of a busi­ness rela­tion­ship between your com­pa­ny and client, but just in case that becomes nec­es­sary, be pre­pared. Regrettably, odds are that even­tu­al­ly your dili­gence in cre­at­ing and retain­ing a paper trail will be put to the test.

As the plain­tiff, the bur­den of proof is on you. Small claims is less strin­gent than full-blown civ­il court, but the require­ments for bur­den of proof is the same. When pur­su­ing a client for non-payment you, as the plain­tiff, must estab­lish three things: First, that there was a busi­ness rela­tion­ship in which both par­ties were oblig­at­ed to meet cer­tain expec­ta­tions. Second, you must prove that the client (the defen­dant) failed to meet those expec­ta­tions. And, final­ly, you must prove that you incurred finan­cial dam­ages result­ing from the client’s fail­ure, includ­ing loss of pay for meet­ing your oblig­a­tions under the agreement.

Assuming you meet bur­den of proof, as the defen­dant, the client needs to defend him­self by coun­ter­ing any one or more of the aspects of your case. He could argue, for exam­ple, that you were doing the work pro bono, thus incur­ring no dam­ages since you would­n’t expect pay­ment whether the project was suc­cess­ful­ly com­plet­ed or not. In addi­tion to, or in place of, chal­leng­ing the pri­ma­ry aspects of your case, he can issue a counter-claim that alleges of you the same things you allege of him–that there was a busi­ness rela­tion­ship, that you failed to meet your oblig­a­tions under that rela­tion­ship, and that he incurred dam­ages thereby.

The client may counter-claim that you failed to pro­duce the agreed upon work, and/or that you failed to do it by the agreed upon dead­line. Then he could argue (with or with­out evi­dence) that you cost him mon­ey in the form of loss of expect­ed income for a vari­ety of rea­sons. A cou­ple of exam­ples are: From the end use of the job, say, it was a sun­tan label project and the late deliv­ery of the project caused the client to get his prod­uct to mar­ket after the sum­mer sell­ing sea­son had passed, or; if the client vend­ed to you part of a larg­er job, and he lost the con­tract with his client because you alleged­ly deliv­ered the job too late or incor­rect, he could counter-sue for dam­ages equal to the amount of the full con­tract. Further, he may try argu­ing that, by your alleged fail­ure to meet your oblig­a­tions, you’ve dam­aged his rep­u­ta­tion and stand­ing in the market.

Naturally, the bur­den of proof for any counter-claim is on him. Assuming he meets his bur­den of proof–clients who make it a habit of not pay­ing their bills are gen­er­al­ly very charis­mat­ic and per­sua­sive speakers–it is then up to you to present to the court suf­fi­cient evi­dence to dis­prove his claims.

If you must take a client to court to recu­per­ate loss­es, for your own sake, try to put your­self in the client’s shoes. Anticipate how he might defend him­self against your claim, and how he might try to prove his counter-claim(s). Think about how he might approach the var­i­ous aspects of the issue and his case. Then be ready for them, armed with evidence.

The more writ­ten doc­u­men­ta­tion you have–even your own notes from meet­ings with the client–the stronger will be your case. Naturally evi­dence and tes­ti­mo­ny from third par­ties is strong, but noth­ing trumps writ­ten (hard- or soft-copy) evi­dence and tes­ti­mo­ny than can be proven to be authored by the defendant.

Even if you can’t afford to have an attor­ney rep­re­sent you in a suit to recov­er loss­es with a non-paying client, invest in a con­sul­ta­tion. Often a one-hour dis­cus­sion with a prac­tic­ing lawyer will pro­vide you with the infor­ma­tion and options to recu­per­ate more than with­out pro­fes­sion­al advice. Additionally, most gen­er­al prac­tice attorney’s are will­ing to write on your behalf a let­ter demand­ing pay­ment to the client. Often a sin­gle let­ter, on the attorney’s let­ter­head, will be suf­fi­cient to open the client’s check­book. If not, then the advice you will receive dur­ing a con­sul­ta­tion will be a wise investment.

In a per­fect world all your invoic­es would be paid ahead of net, and you would nev­er have a client with­hold or decline to pay. Regrettably, you prob­a­bly will. The longer you stay in this busi­ness, the greater your chances of tak­ing on a client who, for one rea­son or anoth­er, will refuse to pay–maybe more than one such client. Many times there is a com­mu­ni­ca­tion prob­lem that leads to the unpaid invoice, but occa­sion­al­ly the client is just a dead­beat. Whether you roll over and let the client take you or stand up for your­self in court is your choice. It’s a deci­sion that says a great deal about you as a professional–to your­self and to oth­er would-be dead­beat clients.

Ten tips to help pre­pare for the pos­si­bil­i­ty of tak­ing a client to court:

1. Save every­thing.
2. Save every­thing.
3. Have a con­tract. Contrary to pop­u­lar belief, in any indus­try in the pro­fes­sion­al world, things are not done on a smile and a hand­shake. Contracts are not bad things. They are instru­ments that spell out who does what when, and what all par­ties may expect of one anoth­er. They pro­tect both parties.
4. Communicate in writ­ing. Even if you work with the client in per­son or via tele­phone, which, of course, is pre­ferred when pos­si­ble, sum­ma­rize the con­tent of those meet­ings in writ­ing. Send follow-up e‑mails to the client reit­er­at­ing the salient points of the meeting.
5. CC your­self. Send copies of any e‑mail to the client to your­self. Most peo­ple think that the copy of mes­sages in their Sent Items fold­er is suf­fi­cient. The prob­lem with Sent Items mail, how­ev­er, is that it can’t be proven that it was sent. Instead, add your address to the CC or BCC fields of all e‑mail, how­ev­er small and triv­ial, so that a copy of your mes­sage is actu­al­ly sent back to you. This cre­ates an Internet trail through your ISP’s servers. Logs of the serv­er activ­i­ty may be sub­poe­naed if it ever becomes necessary.
6. Print fax con­fir­ma­tion receipts. For any fax­es sent to a client, print out a trans­mis­sion con­fir­ma­tion receipt. Confirmation receipts estab­lish that a fax was deliv­ered at a par­tic­u­lar date and time, to whom it was sent, and the num­ber of pages in the transmission.
7. Save pho­to­copies of all checks or mon­ey orders received from a client. In the court’s eyes, the strongest evi­dence of the exis­tence of a busi­ness rela­tion­ship is the pri­or exchange of funds for goods or ser­vices. Your deposit slip or bank state­ment won’t prove any­thing but that you deposit­ed a cer­tain amount of mon­ey from an uniden­ti­fied source.
8. Have the client sign and fax back any proofs you deliv­er, even if deliv­ered online. If that isn’t fea­si­ble, demand feed­back, changes, and approvals via e‑mail. Don’t take ver­bal approval on proofs.
9. Background checks. If you can afford it, check out the client’s back­ground ahead of time. See “Who Are You Dealing With? Client Background Check Essentials”.
10. Save every­thing.