Negotiating a settlement in a debt recovery process can bring great satisfactions

Negotiation

The parties may at any time try to negotiate a settlement and they may do this in any manner that they choose. Negotiations can take place after a claim has been issued as well as before, and they can even take place whilst a trial is in progress. Alternatively there is a formal system for making offers to settle, and this must be employed using strict rules. The system is known as Part 36 Offers and Part 36 Payments. This system can only be used after a claim has been issued.

Negotiation does not have to be conducted on a without prejudice basis, but there are obvious advantages in doing so. You should make it clear that you are negotiating in this way, and the words 'without prejudice' should be prominently marked on any letters and perhaps on other documents too. This means that if the negotiations fail, you will be free to present your strongest case in court and to press the full amount of your claim. Documents marked in this way may not normally be used without your permission, but they may be taken into account when costs are awarded. The law about acceptance of without prejudice offers may be summarised as follows:

a without prejudice offer may be withdrawn at any time before it is accepted;
if a without prejudice offer is accepted, it becomes a contract and is binding on both sides;
an oral agreement is usually binding on both sides, but it is sound practice to confirm it in writing. This avoids arguments about exactly what was agreed.

The exercise of retention of title rights

There may be a clause in your conditions of sale that states that you retain ownership of goods after delivery until payment has been made, and that you may repossess the goods if you have not been paid. Such a clause will only be of use if your conditions govern the contract and the pitfalls in this area were explained earlier in this article. Of course such a clause is only of use if you supply physical goods, as it is not possible to repossess a service that has been performed.

Recovery of goods is almost always less attractive than payment but it may well be worth considering, especially if you fear a possible bad debt. Retention of title clauses are usually very technical. Yours may be an 'all moneys' clause which gives you the right to recover all goods if any payment is overdue, or it may only allow you to recover goods that have not been paid for. Obviously, 'all moneys' clauses give better protection. In exercising retention of title rights you are likely to face the following limitations:

Rights are only against the customer. They cannot normally be extended to a third party who has brought goods in good faith.
Goods cannot be repossessed that have been materially altered. For example, cloth that has been used to make clothes cannot be taken.
The seller is responsible for the transport costs.
Full credit must be given, even if the goods are old, soiled or out of fashion.
Repossession may only be accomplished with a court order or with the agreement of the customer. You do not have the right of forcible entry.

Bad debt write off

At first sight this may seem a very poor alternative to legal action and it will probably look that way on second sight as well, but there are two alternatives that are even worse than writing off the debt. One is to bring a case and lose. The other is to bring a case and win, but fail to enforce the judgment and get actual payment. In both instances court fees and perhaps other costs must ultimately be written off, as well as the original debt.

If VAT is included in the amount written off, it should be recoverable from Customs and Excise. If the debt was incurred as a result of a transaction for profit, then tax relief (income tax or corporation tax) may be claimed at the top marginal rate. This can be illustrated with an example of a bad debt of British Pounds 11,750 (including British Pounds 1,750 VAT) written off by a company that pays corporation tax at a marginal rate of 30%. The after-tax cost of the writeoff would be British Pounds 7,000

1. Knowledge of local and state laws
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2. Start a debt recovery trial if you want your money back
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3. Sellers can sue customers and go to trial if these do not respect the contract
Are you sure what terms govern the contract? Sellers (and buyers too) often get it wrong and misunderstand the legal position. This does matter. Sellers frequen...

4. A customer that cannot pay your invoices might also not pay other suppliers
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5. A debt recovery case allows you to claim the maximum amount owed to you
Choice of legal route Right at the beginning you must choose between issuing a claim in the High Court or a county court, or presenting a winding up or bankrupt...

6. Interest rates debt recovery costs and time limit for issuing a claim
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7. What to keep in mind when issuing a debt recovery claim
The correct wording for most of the various categories of defendant is as follows: An individual You should put the surname and if possible all forenames,...

8. The debt recovery defendant has various legal options
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