Negotiate the terms before you sign, not when you get the bill. I signed a bad deal is not a good defence.
Dealing with business disputes is what I do day in and day out. So, I get to see all sides to disputes and the people that have them. From my observations, there is something common about disputes and the people that usually defend claims (unsuccessfully). Good business owners have good reputations. Those reputations come about because the owners and management tend to be well known as people who will honour their promises and contracts signed. In contrast, businesses that regularly defend claims for payment, tend to do it more than once, and they tend have more than one dispute. Why is that?
The common scenario is this…. Party A – a customer wants to defend a claim by Party B. Usually Party B has issued a letter of demand or a Court proceeding against Party A for payment. Party B is threatening or suing on a contract (usually after the tax invoice(s) are rendered after work is performed).
The issue (alleged defence) by Party A is that he/she feels like the tax invoice is too much for what he/she received under the contract signed. Party A feels like he/she did not get value (or Party A just wants to haggle a discount on the invoice rendered). The question usually put to the lawyer is “I don’t like what I got, I didn’t seem to get value, or I want a discount. Can we do that? Do I have to pay the entire invoice? Can I get a discount?”. To answer that question, in basic contract law terms, the Lawyer would look at it this way, “do the facts create a defence or set off for Party A to the claim for payment by Party B?”
Generally, if there is no other reason than Party A is not happy with what he bargained for, the answer is “no” – There is no defence or set off to the claim by Party B if Party A is just not happy or just wants a discount on the agreed price. To defend a claim arguing some sort of baloney and getting a lawyer to draft a weak defence aimed simply at reducing payment is a very expensive way to get a discount (not to mention ruining a relationship and business reputation).
Just because Party A does not feel like he/she got value under the Contract or wants to reduce the contracted price after the contract is performed, there will be no defence or set off to the claim. There is little that Party A can lawfully do to avoid full payment under the Contract, without some other legal basis to avoid payment. Why?
Basic contract law looks at the intention of the parties when they entered into the contract and will seek that parties be bound by their intentions when the contract was signed. For example, the legal question is what did Party A promise to pay Party B for the promise performed under the contract? If performance of the contract has occurred, Party A must pay. It is too late after performance of the contract to haggle on the agreed price. In other words, it is not a defence to the claim for Party A to say that he/she should get some money back from Party B (or a discount) just because Party A feels like she/he signed a bad deal or the price agreed upon was too high.
The moral of the business story is – without some other legal remedy – you can’t turn around to someone after a contract is performed and say you don’t want to pay or you want them to reduce their price. Other than not being a defence to a claim, it is poor business practice. That type of behaviour and business culture will lea
d to a bad reputation for your business and inevitably legal bills (paying dispute lawyers like me) for you and/or your business.
Unless you have legal advice and some other legal remedy to legitimately mitigate or avoid payment, you should take the hit and pay what you promised when you signed the Contract. Remember and train yourself and your staff to negotiate a good price before contracts are signed and not to haggle afterwards.
If you have a customer who wont pay or you think you have a defence to a claim (other than just signing a bad deal) please feel free to refer your question to our disputes lawyer Kristine Hopkins email [email protected] .