It goes without saying that when setting up and operating your own small business, pulling in the work and clients is a top priority. One of the key facets of small business law, therefore, should be the contract – a point of reference for the terms on which you are engaged which includes (importantly) how and when and how much you will be paid. However, you would not be alone if you have in the past operated without a contract. You may be in a rush to get your services up and running or you may be working with a loyal and trusted client or customer. There are a plethora of reasons why your small business might be operating without the safety net of contract, often without mishap.
Imagine the scenario however when a dispute arises – your client refuses to pay you, or there is an argument about quantity or quality of stock provided. You started work with your client in good faith but you do not have a contract. Where do you go from here?
Is there any agreement in place at all?
A contract does not have to be ‘signed, sealed and delivered’ to be effective. If you have previously sent terms and conditions to your client or a purchase order then refer to these. If your client has never sought to dispute them or provided an alternative, you have a decent argument that they were aware of the terms.
If not, what other documents exist to show that you did the work and how you did it? Chains of email correspondence can be useful, as can other contemporaneous notes from meetings for example. The idea is that you build up a picture of you and your client’s ‘course of conduct’ to demonstrate what the reasonable expectations were of each party. By way of example, have you regularly invoiced your client and they have paid in full in a timely manner until now? If so, they can be said to have affirmed the agreement between you.
Depending on the circumstances, your main objective may be that you just want to get paid for the work already done. If this is the case, send a hard copy invoice detailing in full the work completed or products provided. Follow up with further late payment notices if it remains unpaid. If you then pursue a claim, you will be able to demonstrate to a court that you have given notice to your client that payment is required.
Be reasonable and consider a settlement
However, pursuing a claim at court can be expensive and stressful, particularly if the victory is only likely to be a moral one. It may be that you even want to maintain as much goodwill as you can with the client in question and limit reputational damage to your small business, however galling that may be. Attempting to reach a settlement with your client might be the best option and may even mean you engage with them again (with a contract in place!).
The contract should be central to your understanding of small business law. Do not be rushed into commencing work without a written agreement in place – they protect both parties and your best clients will expect to engage with you on that basis.