Navigating Legal Options for Unpaid Invoices: What to Do When You’re Not Paid: Legal Options Explained

If you own a business, whether big or small, you are going to have to trust a customer (including other businesses) to pay you on time under the terms of the contract. When entering into a contract, you need to ensure that the other party is aware of the payment terms underlying the deal; the other party needs to know when it must pay, how much is owed, and how payment should be made. Even if you do this, you will always run the risk of non-payment. If the other party fails to pay, you can file a lawsuit, but what should you do prior to filing the lawsuit? Here are some basic steps that you can take to attempt to obtain payment. 

Determine Your Damages 

Before you bring a lawsuit for non-payment, you will want to determine how much you believe you are owed. When making this determination, you will need to understand what you would like from the party that has not paid. Are you simply seeking full payment? Do you believe that the nonpayment has resulted in additional damages? Did the way in which the nonpaying party performed the agreement lead to additional damages to your business?  

Make a Formal Demand 

After determining how much money you believe you are owed, you can start by drafting a formal demand letter and sending it to the other party, regardless of whether it is a person or business. The following should be included in the demand letter: 

• Include how the other party is in default, i.e., unpaid invoice 

• Include how much is outstanding and owed 

• Demand payment of the outstanding amount, i.e., immediate repayment or require that payment must be made by or before a certain date 

• Include language as to the fact that you will consult with an attorney to seek payment if full payment is not made by a certain date 

Filing a Lawsuit 

If your demand letter fails to yield payment, the next step will be filing a lawsuit. This will include the initial filing of a complaint in a court that has jurisdiction. In Wisconsin, this would be done in the circuit court of the county where the defendant resides or where the contract was performed. In a lawsuit, you will be able to seek repayment of the amounts due under the contract. You may also be able to seek additional damages for attorneys’ fees depending on the language in the contract. Lastly, if there are other issues surrounding the way that your customer performed the contract, there can be additional causes of action that can be asserted in the Complaint. Sometimes these additional causes of action can allow collection of attorneys’ fees even if the language in the contract does not allow you to seek recovery of your attorneys’ fees.

Obtaining Judgment 

Once a lawsuit has been initiated, the next step is obtaining a judgment. At the end of the day, a judgment is a piece of paper signed by a Court that says how much another person or business must pay for breaching the contract. There are three types of judgments that might be made, including a default judgment, summary judgment, or judgment after a formal trial has taken place. A default judgment occurs when the defendant fails to answer the complaint or appear in court. A summary judgment will be given if you file a motion for summary judgment asking the judge to simply make a determination that the defendant is in default for not paying, thereby ignoring the need for a trial. Lastly, a judgment can be made after a formal trial has taken place in front of the judge and/or judge and jury. 

If you need assistance understanding your legal rights regarding non-payment, consult with our experienced attorneys at Halling & Cayo, S.C. With decades of experience, our attorneys have successfully helped businesses like yours secure the payments they are owed.