Sole trader - Client cancelled Contract - what should I do?

pinkpinkfizz

hello,

I'm a Scottish based sole trader. I have a 12 month contract with a client, which is 3 months into the contract, with outstanding payments still due.

I just received an email from my client stating they are terminating the contract with immediate effect, with no penalties, no hard feelings etc ...

This is a new situation to me and I want to make sure I get my actions correct from the outset, so as yet I haven't responded to the email.

What do I do? What can I do?

Any useful advice very welcome please

fishybusiness

Depends on how much is at stake and what the exit terms are.

If it were me I would grumble, push them for payment and if not forthcoming I would probably move on.

Co obviously doesn't want to do business, it will no doubt cost you to enforce any terms.........

Savvy_Sue

Well, it's your contract, so not really up to them to say they're terminating with no penalties. What does the contract say about early termination? A mobile phone company would require the remaining contract to be paid in full, for example.

BUT ... is it a 'can't pay' or 'won't pay' situation? If the former, then you may have to chalk this one up to experience. If it's a 'won't', then do you have a small claims court system in Scotland?

How much money are we talking about?

pinkpinkfizz

I put the contracts together myself and but I hadn't considered a early termination/get out clause (I know it seems crazy, I can't actually believe I overlooked it myself).

I think I'm just going to have to chalk it up to experience... it's £5000 but I'm not convinced that he has the money so probably best to just walk away to minimise the stress!

Thanks for replies

Aquamania

pinkpinkfizz wrote: »

I put the contracts together myself and but I hadn't considered a early termination/get out clause (I know it seems crazy, I can't actually believe I overlooked it myself).

I think I'm just going to have to chalk it up to experience... it's £5000 but I'm not convinced that he has the money so probably best to just walk away to minimise the stress!

Thanks for replies

Indeed. This is exactly why you should not draw up contracts yourself, but rather seek independent legal advice. Without any reference as to how the contract may be terminated, it may be considered unenforcible, and that could at it's worst, mean the entire contract is not worth the paper it's written on.

Anyway, you can't get blood out of a stone, so if the customer really can't pay (as opposed to won't pay) then don't waste any time or money pursuing it ... especially when such a claim may not stand up legally either.

martindow

I would think that a claim could well succeed for work already done that has not been paid for. As has been said don't waste your time if they have no money to pay it though.

Lots of us have informally agreed to things without anything in writing. I think you're in good company in getting a proper agreement drawn up after an incident like this.

bris

It's a 12 month contract so it terminates after 12 months, if there is no get out clauses then the client owes you for the rest of the contract.


It takes all parties to the contract to rescind it, if one says no then the other is in breach of the contract. They can't just say I'm terminating the contract without penalty, but you have to take them to court.


If I was you I would work out all the losses due to their breach and start a small claims case against them, it's pretty cheap to do and an LBA is only the cost of a stamp.

dacouch

Have a read of this relevant thread from pepipoo

http://forums.pepipoo.com/index.php?showtopic=101068&st=0&start=0

undaunted

You ideally need someone appropriately qualified to read what is in the contract in order to offer you appropriate advice.


If you've just said I will supply you x for the next twelve months & price will be y for example there may be nothing to stop him from deciding that for whatever reason he no longer wishes to buy for 12 months.


If on the other hand he has agreed to purchase for a fixed sum or period and there is no get out clause available then you may have a case for suing - if he has the money / assets available to pay any Judgment obtained


In the absence of any evidence that he can't withdraw I would say your best bet is to ask for immediate payment (assuming it's already due) for any work already done. If necessary you could sue him for this regardless of the contract being terminated for future sales but would put the lost business down to experience and look for new clients.


Good luck

HappyMJ

pinkpinkfizz wrote: »

hello,

I'm a Scottish based sole trader. I have a 12 month contract with a client, which is 3 months into the contract, with outstanding payments still due.

I just received an email from my client stating they are terminating the contract with immediate effect, with no penalties, no hard feelings etc ...

This is a new situation to me and I want to make sure I get my actions correct from the outset, so as yet I haven't responded to the email.

What do I do? What can I do?

Any useful advice very welcome please

Ask for the money owed to be paid ASAP.

As you don't have any termination clauses you can technically ask for the remaining term of the contract to be paid out.

I have a 4 week penalty written into my contracts. Either one of us can terminate the contract after the first 4 weeks (during which no notice by either party is required-that's usually enough time to figure out if we'll actually get on well enough to continue the contract to term) by paying a 4 week penalty.

Depending on what you do you can write whatever you want into your contract.