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:
- Save everything.
- Save everything.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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”.
- Save everything.