Terminating contract early due to late payment

[Safe Collections]

Alarm bells should be ringing for you at this point as an unannounced under-payment and talk of cashflow problems is never a good sign. We definitely share your concern as to the solvency of the client and would echo other posters who have encouraged you to start planning for a swift exit.

In regards to your question:

Also my question is, if client pays 2 days after it was due, can i still terminate my contract after I get the money?

Theoretically we would say that you probably can, they have already breached the contract so you would be within your rights to terminate in our opinion. It is unlikely the rate you are on reflects the risks of supplying a business with poor cashflow so it would be disadvantageous to YourCo to continue. Please note, this isn't legal advice

With regard to:

If you need to go down the line of legally demanding your money, look up issuing a statutory demand.

You need to be sure that your claim is 100% free of any issues or queries, be they real or imagined. If you issue a Statutory Demand and the claim has a query (or the debtor creates a convincing query) it is entirely possible for the petitioner (you) to be held liable for the debtors costs if they successfully challenge the demand.

Statutory Demands are a precursor to Insolvency Proceedings that should be used in specific circumstances, they are not a magic bullet for getting paid.

[anthony]

have a read of this: The Late Payment of Commercial Debts Regulations 2013 - Pay on Time

Will give you all the info you need to know on late payments etc...

[fool]

Yes I know, my mistake for accepting rolling contract!

Regarding the client, yes it is clear to me now that with this client it is going to be ongoing issue, I can hear him talking about not paying to others, so I just want to get away from contract quickly and painlessly now.

My next question is: can I backdate my contract termination, just to elaborate: I sent 2 - 3 emails asking when I am getting paid, today is a due date. So for example if client will pay in 2 days, can I backdate my termination? So ultimately wait for payment first and say that I am terminating without notice because this payment came later than agreed?

I'd say it depends how long you've been with the client and what type of people you think they are but I tend to side with the "get out now" side of things. They've already technically breached, so I doubt they could legally hold you to your notice.

Problem is if you leave now, you might struggle to get the money at all. Then again, if you stay, you'll probably just build up a bigger debt with the client that won't be paid either. It's especially suspect if they've hired you knowing they can't pay.

That happened to me last year, eventually when I left the client submitted he would not pay me due to quality issues with my work. I'm fairly sure the guy never intended to pay my day rate and now aware that he did the same thing with 3-4 other contractors.

If you need to go down the line of legally demaning your money, look up issuing a statutory demand.

[SimonMac]

Agency regs won't factor here.

I know, that's why I said it

[northernladuk]

Yes I know, my mistake for accepting rolling contract!

Regarding the client, yes it is clear to me now that with this client it is going to be ongoing issue, I can hear him talking about not paying to others, so I just want to get away from contract quickly and painlessly now.

My next question is: can I backdate my contract termination, just to elaborate: I sent 2 - 3 emails asking when I am getting paid, today is a due date. So for example if client will pay in 2 days, can I backdate my termination? So ultimately wait for payment first and say that I am terminating without notice because this payment came later than agreed?

I've not been in that situation but if they can't pay I'd seriously consider just not turning up anymore. It depends on your attitude to risk and how much you are comfortable to possibly lose if they don't pay up.

You need to think carefully though cause you will definitely have work hard to get anything from them if you just bail.

Speak to Safe Collections who post on here for their opinion...

And get searching for the next gig like yesterday.

[ypetusko]

Agency regs won't factor here.

IMO you can't claim breach straight off the bat like this. You need to find out why he isn't paying and if this is going to be an ongoing issue. If it's a one off miscommunication it isn't really breach, tulip happens. If the client is going to wilfully ignore the terms going forward then it is. I am assuming this is a small client what with the lack of need for timesheets and the haphazard approach to paying you. Get to the bottom of the situation first.

All that said though if he doesn't know when he will have the money to pay you now I'd really think about getting out quick. It's highly likely he won't have the money to pay you and make up the shortfall next month either so could be on a hiding to nowhere here. You can use every process in the book but if he has no money you are going to go legal, which still probably won't work. You could try a credit check on the business to see what their situation is.

The second thing which is a bit off topic but a HMRC won't agree you are a contractor with a rolling contract like that. Big IR35 problem and if it's a small high pressure company I can't imagine D&C isn't a problem. Bit hypothetical if you are not getting paid though. Just thought I would point it out for future reference.

Yes I know, my mistake for accepting rolling contract!

Regarding the client, yes it is clear to me now that with this client it is going to be ongoing issue, I can hear him talking about not paying to others, so I just want to get away from contract quickly and painlessly now.

My next question is: can I backdate my contract termination, just to elaborate: I sent 2 - 3 emails asking when I am getting paid, today is a due date. So for example if client will pay in 2 days, can I backdate my termination? So ultimately wait for payment first and say that I am terminating without notice because this payment came later than agreed?

[northernladuk]

Timesheet in your situation could be a red herring, payment on the basis of a signed timesheet is only applicable in terms of the Agency Regs, as you are direct this is not applicable.

This is simply a breach of contract (assuming what you have said is right) so then no notice is needed, however if you are 1 day over the 15 days then you need to stop over reacting. My issue would be when they said they don't know when you will get the other half, this seems more like a cash flow problem at the Client, so the contract and legalities aside if they don't have it they can't give you it.

If you are still on site you will need to decide if it is still worth working at risk putting in more hours at a company that can't pay you.

I have DIRECT rolling (no end date) contract with a client

Agency regs won't factor here.

IMO you can't claim breach straight off the bat like this. You need to find out why he isn't paying and if this is going to be an ongoing issue. If it's a one off miscommunication it isn't really breach, tulip happens. If the client is going to wilfully ignore the terms going forward then it is. I am assuming this is a small client what with the lack of need for timesheets and the haphazard approach to paying you. Get to the bottom of the situation first.

All that said though if he doesn't know when he will have the money to pay you now I'd really think about getting out quick. It's highly likely he won't have the money to pay you and make up the shortfall next month either so could be on a hiding to nowhere here. You can use every process in the book but if he has no money you are going to go legal, which still probably won't work. You could try a credit check on the business to see what their situation is.

The second thing which is a bit off topic but a HMRC won't agree you are a contractor with a rolling contract like that. Big IR35 problem and if it's a small high pressure company I can't imagine D&C isn't a problem. Bit hypothetical if you are not getting paid though. Just thought I would point it out for future reference.

[ypetusko]

Timesheet in your situation could be a red herring, payment on the basis of a signed timesheet is only applicable in terms of the Agency Regs, as you are direct this is not applicable.

This is simply a breach of contract (assuming what you have said is right) so then no notice is needed, however if you are 1 day over the 15 days then you need to stop over reacting. My issue would be when they said they don't know when you will get the other half, this seems more like a cash flow problem at the Client, so the contract and legalities aside if they don't have it they can't give you it.

If you are still on site you will need to decide if it is still worth working at risk putting in more hours at a company that can't pay you.

Thanks a lot, this is good to know that timesheets are mostly agency regs.

I am overreacting for 1 due date, because of various different factors I don't like about this client, so it might be a good chance to bail out.

Thanks again!

[SimonMac]

Timesheet in your situation could be a red herring, payment on the basis of a signed timesheet is only applicable in terms of the Agency Regs, as you are direct this is not applicable.

This is simply a breach of contract (assuming what you have said is right) so then no notice is needed, however if you are 1 day over the 15 days then you need to stop over reacting. My issue would be when they said they don't know when you will get the other half, this seems more like a cash flow problem at the Client, so the contract and legalities aside if they don't have it they can't give you it.

If you are still on site you will need to decide if it is still worth working at risk putting in more hours at a company that can't pay you.

[ypetusko]

Does your contract specify one month notice?

Dunning processes have been covered here before - do a search.

Yes it does.

I did a search, and found couple of similar cases with agencies, but not exactly same (as in: "can abscense of timesheet be used as a excuse to dismiss late payment, even though half of payment was paid and I have chat logs where client is saying that he doesn't know when he will be able to pay the rest?").

Also my question is, if client pays 2 days after it was due, can i still terminate my contract after I get the money?

[NotAllThere]

Does your contract specify one month notice?

Dunning processes have been covered here before - do a search.

[ypetusko]

Hello.

I am a developer. I have DIRECT rolling (no end date) contract with a client. On my contract it is said that after receiving signed timesheet and invoice my payment is due in 15 days. My client told me not to bother with timesheets. I sent an invoice and in one week I received HALF of the payment to my business bank account, and client said that he is not sure when he will have money for another half. It is 15 days past now, and I want to see if I can terminate early without giving a 1 month notice, and would client be able to decline my termination on a basis that I never sent signed timesheets (I still have all my work history in GIT code versioning tool)

Thanks,
Y.