Is it illegal to commission work without funds to pay it?

sheepysheep60

I have a client who requested my company to create a website for him. We gave him a written quote and have written approval of costs from him months ago. Now our invoice is due we have been told that he is waiting for funds to arrive into his account, which won't be for a further two weeks (8 weeks after invoice date). This is because he was seeking investment while we were working on the site (something we weren't aware of) which has just come through.

Two things jump out at me: him getting investment was never guaranteed, and he is late on his invoice. Is what he did legal?

getmore4less

Anyone can order anything, there is no indication they won't pay just they want to delay payment.

You just rack up the penalties for late payments you built into the contract.

TonyMMM

It is a business to business transaction - you should have satisfied yourself that he had funds before undertaking the work if you had any doubts. Perhaps by seeking references, taking a substantial deposit, or arranging staged payments. What does your contract say about penalties for late payment ?

It would only be illegal (fraud) if you could show that he INTENDED never to pay i.e. he obtained your services by some deception - but that would be almost impossible in this type of circumstance.

InsideInsurance

As above, no intent to pay is fraud. Poor cashflow management is just poor business from both his and your perspective.

A whole host of things can happen between the months ago when he approved the cost to 6 weeks ago when you presented the invoice. If a business is running on a hand to mouth basis if his customers/ investors are late paying then he is going to be late paying his suppliers. Your due diligence before giving him credit should have identified this an appropriate credit decisions made before work was commenced.

Pennywise

Even if it was illegal, what would you hope to achieve. Police aren't interested as it's a civil matter. You'd have to go through the courts, which will cost you a lot of money. Far better to avoid the problem in the first place by setting payment dates, including an advance deposit, and your contract providing for late payment interest.

DKLS

Start to introduce stage payments for your website projects to minimise risk to yourself and customer, tie these down to key deliverables and dates.

e.g.
Project kick off 25% due
Deliverable 1 Design 25%
Deliverable 2 Beta build 25%
Sign off and delivery 25%

PS can you PM with a link to your site and a ball park cost for a 15 page site with ecommerce in HTML5 please.

DCodd

A company has to be insolvent for what you describe to be illegal. However, as pennywise has said that does not help you in the slightest as an insolvent company wrongfully trading is unlikely to be able to pay it's debts regardless what action you take.

motorguy

DKLS wrote: »

Start to introduce stage payments for your website projects to minimise risk to yourself and customer, tie these down to key deliverables and dates.

e.g.
Project kick off 25% due
Deliverable 1 Design 25%
Deliverable 2 Beta build 25%
Sign off and delivery 25%

PS can you PM with a link to your site and a ball park cost for a 15 page site with ecommerce in HTML5 please.

Thats how i would be handling it.

A mate of mine used to build in time related major "faults". Conversation would go like this

Customer :- "John, this system you've sold us has crashed"
John :- "Well, i'd come down straight away but theres an outstanding invoice here that hasnt been paid for 3 months and you havent been taking my calls"
Customer :- "Really? Oh, the money is here for you"
John :- "Ok, i'll drop down and pick it up, and have a look at your system while i'm there"

londonTiger

you should ask for money up front for this type of projects. I always do.

davidious

use escrow type website covers both persons

londonTiger

davidious wrote: »

use escrow type website covers both persons

no, you should have *some* trust in business. get payment up front. escrow is silly, you end up having to pay 10%+ to the middleman for doing nothing.