Contract and Debt Disputes

Not always. Sometimes it is the most effective way to get the debtor to pay. But many debt disputes are resolved while the prospect of court proceedings hang over the parties but a compromise is reached through negotiation. This may be achieved by correspondence, formal mediation or arbitration. Court proceedings are costly, so it’s important to consider whether the value of the debt justifies legal proceedings and how likely you are to be able to enforce a money judgment.

Sometimes, but this is not guaranteed. The general rule is that the successful party gets their legal costs paid by the unsuccessful party but there are exceptions and it is unusual to recover all your legal costs even if you are successful.

If your contract includes a costs clause or the opponent’s conduct is unreasonable you may recover all of your legal costs but the rule of thumb is that you will be granted 60-70% of your legal costs if you are the successful party.

If the debt is under £10,000 it is treated as a ‘small claim’ and the general rule on costs does not apply. You are unlikely to recover your legal costs even if you are successful. For this reason we recommend you seek advice from Citizens Advice.  about how to make a small claim without the help of solicitors. If the debt is over £10,000 but under £100,000 the legal costs you can recover are limited by fixed costs set by the court.

It is important to consider at the onset whether the debtor company has any assets and is capable of paying the debt. There is a strong risk that you could waste legal costs in pursuing a claim against a company that goes into liquidation to avoid paying the judgment debt. You may be able to submit a claim in insolvency proceedings or pursue directors if personal guarantees are in place but these routes would involve further costs and may not result in any payment of the debt.

Act promptly by reviewing the contract terms, documenting the breach, retaining all evidence of the breach and seek legal advice before taking further action. You may be entitled to damages, termination, or specific performance. Be wary of breaching the contract yourself.  The other party’s breach may not have brought the contract to an end.

A breach may not automatically terminate a contract. It depends on the seriousness of the breach. A fundamental or “repudiatory” breach may give you the right to terminate, but legal advice is essential before doing so. Acting in breach yourself in the mistaken belief that the contract has come to an end could have serious consequences.