Legal disputes regarding quality of workmanship and late payments
Payment delays are sometimes claimed to be cash-flow based, but obviously have a detrimental knock-on to your own cash-flow. In more extreme cases spurious claims around the quality of work and materials may be raised to avoid or reduce payments.
What are your rights as the supplier in all these situations?
If you are working business to business, then for pure delayed payments the law provides you with some protection. You can assert your rights under the Late Payments of Commercial Debts (Interest) Act 1998. This Act inserts an implied term to allow you to claim for interest, fixed sum and costs in business-to-business contracts. For this interest to be implied, there must be a contract and each party must be acting in the course of business. Consumer contract falls outside the scope of the Act.
If the above conditions are met and you have an unpaid debt, then your rights under the Act kick in. Either immediately after any agreed payment date or, if none is specified, 30 days after presentation of the relevant invoice.
The rate of statutory interest that can be applied is 8% per annum. In addition, once interest begins to run, you, as supplier are also entitled to a fixed sum of:
• For a debt less than £1,000, £40;
• A debt of £1,000 or more, but less that £10,000, £70;
• Debt of up to £10,000 or more, £100
In addition, you may also recover costs for the expense of hiring a debt collection or instructing a solicitor to send solicitor’s letters.
Turning to quality claims, these can arise in two ways. The most common is a contractual claim and usually based on one of the implied terms which sales of goods and services legislation imports into all such contracts whether entered into with a business or a consumer. The most common of these terms may be familiar; they require goods or goods and services supplied to be of satisfactory quality and fit for purpose.
So far as fitness for purpose is concerned, that means fitness for all usual applications of the product or for any specific purpose made clear by the purchaser prior to entering into the contract.
Genuine claims in relation to the implied terms might arise. For instance from flooring not standing up to heavy traffic in a commercial setting. Which was known by you when selling the products.
In addition to contractual liability, common law negligence may also be an issue.
How can you best protect yourself from these issues?
The simple answer is by way of a paper-trail. Ensure you use appropriate quotes, purchase orders and order confirmation documents, all referencing terms and conditions of business and ensure that these record exactly what is being contracted and put the onus on the purchaser to ensure that what is being offered to them is suitable for their requirements.