Debt recovery - overseas client

[TheCyclingProgrammer]

Well it’s finally happened after more than 9 years, but my desperation for work has led me to go against my instinct and take on a project for a client I had my doubts about and it’s all gone tits up.

I will spare the details, but the client isn’t willing to continue development as they aren’t happy with the amount of work produced compared to my original estimate. Weekly rate on a fixed price per sprint basis. Client could have terminated after any sprint if they were not happy. I’ve tried and failed to reach a compromise and I’m no longer interested in working with the client.

My first invoice was paid, my second invoice for the last two weeks is now overdue. Client is not in possession of any code or development assets and will not be until the invoice is paid as per my contract.

Right now I’m waiting to hear back from them and I put the odds of them paying about evens.

Biggest complication is that the client is based in Spain. They are a British individual however and I believe a British citizen. Contract is of course governed by English law.

Are Safe Collections still the people to talk to? The amount owed is below £10k so I believe eligible for small claims though I have no idea how you go about enforcing a debt for somebody outside the country. Fortunately the supply is outside the scope of U.K. VAT so I don’t have that to worry about. Am I also able to add on any costs of recovery to the clients bill? Do I bother with any more than a single reminder email before handing over to somebody like Safe Collections?

[WordIsBond]

Am I also able to add on any costs of recovery to the clients bill? Do I bother with any more than a single reminder email before handing over to somebody like Safe Collections?

Let's see. NLUK would say, "Have you asked your accountant?"

TCP might ask, "What does your contract say?"

WIB would assume that if you are asking, your contract doesn't say. So he'd tell you to not make that mistake again and modify your contract template to specify 30 days payment, 18% interest thereafter, a 20 day reminder email, an 80 day reminder email, and debt collection at 90 days, the fee of which will be added to the amount due.

WIB would also recommend that you google this site (try: dunning foreign) to see if anything turns up, and if not, call Safe Collections and ask them if they handle foreign cases and what procedure they recommend you follow before involving them so as to not mess up the case.

[TheCyclingProgrammer]

Have already looked at Safe Collections website. They do appear to handle overseas cases. Not contacted them yet, I’m waiting to see how things pan out with the client in the next few days but will certainly contact them before taking any action.

I use the IPSE standard contract which doesn’t explicitly mention late payment interest or similar but I was under the impression that this was a statutory right not a contractual one.

Besides that, my contract covers obvious stuff such as payment terms (14 days by default) and grounds for suspending service and terminating due to unpaid invoices so I feel like I’m covered in that regard though that doesn’t stop the client disputing the invoice I guess.

Digging deeper it seems there is also a statutory right to add “reasonable costs” for the recovery of debts.

I haven’t asked my accountant as he doesn’t provide legal advice.

[WordIsBond]

Digging deeper it seems there is also a statutory right to add “reasonable costs” for the recovery of debts.

The advice I received was that there is a statutory right, and if your contract is under English law you're fine, but that you are better off with overseas clients if it is explicit in the contract. The reasoning being that you may need someone in a different legal jurisdiction to enforce collection sometime, and if you do, you and they may have an easier time if you are relying on contractual provisions to which your client explicitly agreed.

I've not had to go through one of these yet. Pretty happy about that, it's sure to happen sometime.

[TonyF]

Right now I’m waiting to hear back from them and I put the odds of them paying about evens.

I'd ring the IPSE legal advice line and I'd also look at what cover your membership gives you for non-payment of invoices.

[TheCyclingProgrammer]

I'd ring the IPSE legal advice line and I'd also look at what cover your membership gives you for non-payment of invoices.

Good point! Thanks.

[Lance]

<<<SNIP>>>
My first invoice was paid, my second invoice for the last two weeks is now overdue. Client is not in possession of any code or development assets and will not be until the invoice is paid as per my contract.

<<<SNIP>>>

Are Safe Collections still the people to talk to? The amount owed is below £10k so I believe eligible for small claims though I have no idea how you go about enforcing a debt for somebody outside the country. Fortunately the supply is outside the scope of U.K. VAT so I don’t have that to worry about. Am I also able to add on any costs of recovery to the clients bill? Do I bother with any more than a single reminder email before handing over to somebody like Safe Collections?

My experience of UK courts is that as you are withholding the goods until you get payment they are unlikely to find against your client for non-payment. I also think that debt collection will fail as the money isn't owed until you've delivered. What are the three things that make a valid debt? 1) An agreement to purhcase (contract or PO), 2) proof of delivery (timesheet, or in your case some code), 3) an invoice. Without delivering the code you'll struggle unless your contract clearly states that payment is before delivery.

As for collections... Spanish law, like most other European countries, is inquisitorial rather than adversarial (UK and USA use the latter) so the format is very different. Try this link though as i will help guide.

https://www.citizensadvice.org.es/fa...ourt-in-spain/

[MB2]

Are Safe Collections still the people to talk to? The amount owed is below £10k so I believe eligible for small claims though I have no idea how you go about enforcing a debt for somebody outside the country. Fortunately the supply is outside the scope of U.K. VAT so I don’t have that to worry about. Am I also able to add on any costs of recovery to the clients bill? Do I bother with any more than a single reminder email before handing over to somebody like Safe Collections?

We have used Safe Collections for international commercial debt and they are good but will take 20% and I suspect will only pursue if there is a very clear contract that has been breached. If time is not of the essence I would try yourself first but if you think they company might go bust then I would put safe collections onto them straight away.

[TheCyclingProgrammer]

My experience of UK courts is that as you are withholding the goods until you get payment they are unlikely to find against your client for non-payment. I also think that debt collection will fail as the money isn't owed until you've delivered.

I disagree. The contract is on a time and materials basis. They are paying for my time, not a fixed end deliverable or product. The service (two weeks of development) has been delivered. Additionally, my contract is very clear that any rights or IP in the developed software are not assigned to the client until all outstanding amounts are paid - the code does not belong to them.

[Lance]

I disagree. The contract is on a time and materials basis. They are paying for my time, not a fixed end deliverable or product. The service (two weeks of development) has been delivered. Additionally, my contract is very clear that any rights or IP in the developed software are not assigned to the client until all outstanding amounts are paid - the code does not belong to them.

As long as it's clear in your contract then you should be good for it. (Spanish law notwithstanding).