In today’s Freedom Friday blog and email newsletter, I want to talk about a topic, and again, this isn’t really a question, but it’s a topic I get asked about a lot, and that’s how to enforce my contract, especially if my customer didn’t pay, and that. So, in today’s Freedom Friday and email newsletter, I’m talking about how to enforce contracts.
First of all, if you are a general contractor or a subcontractor and we’re talking about a construction contract, you need to consider filing a statutory lien on your work, and you may wish to have an attorney assist you with doing so to protect your rights. Oklahoma’s statutory lien process for construction contracts is really a separate topic and article for another day, but I wanted to bring that up because if you are doing construction work, and your customer isn’t paying (or you’re a subcontract not being paid by the general contractor), filing a lien is the number one way to enforce your contract because you can foreclose on the lien at the same time as filing suit to collect money damages.
So, what else can you do to enforce your contract, regardless of whether or not it’s a construction contract? Here are five (5) steps to enforce your Oklahoma contract:
1. Review the Contract
The first step to enforcing your contract, and this should be done before you file your lien if you have a construction contract, is to review the contract. Read the contract carefully and look for payment terms, deadlines, grace periods, penalties, late fees, remedies for breach, and any specific dispute resolution process such as required mediation or arbitration. Understanding the contract will inform your next steps.
2. Send a Demand Letter
The second step to enforcing your contract is to send a demand letter. The demand letter needs to explain the breach, cite the relevant terms of the contract, demand payment or performance by a certain deadline, and warn the defaulting or breaching party of legal action if the breach is not resolved.
3. Negotiation
The third step to enforcing your contract is negotiation, which is usually informal at this stage. This can include negotiating a new payment plan, entering into a partial settlement (the defaulting party agrees to pay an amount smaller than what was owed), and/or agreeing to modify the terms of the contract.
4. Mediation or Arbitration
The fourth step to enforcing your contract is to consider mediation or arbitration, especially if it’s required by the contract, or informal negotiations did not resolve the issue. Sometimes a contract will also require the parties to submit to either negotiation or mediation before or instead of filing a lawsuit. Mediation is when the parties agree to hire a third person (called a mediator) to attempt to resolve through a formal process of mediation. However, arbitration is usually binding and is a more involved process of litigation. In some cases, arbitration is less expensive than litigation in court, but in other cases, the filing fees are more expensive, although the parties can reach a timelier resolution instead of protracted time in court.
5. File a Lawsuit
The fifth step to enforcing your contract is to file a lawsuit. In a lawsuit for breach of contract, the plaintiff must prove that the contract exists, the other party failed to pay or otherwise comply with the terms of the contract, and money damages occurred as a result. The plaintiff can recover principal and interest, but also in many instances attorney’s fees (depending on the type of contract), court costs, and both pre-judgment and post-judgment at the statutory rates.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at Jonathan@libertylegalok.com to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at https://www.libertylegalok.com/