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Unpaid Invoices and Contract Law: A Legal Justification?

Posted on 27 March, 2017 at 11:05

The Small Claims Court deals with a wide variety of legal matters and claims, affecting all areas of life. Unlike most tribunals, it does not have a specific mandate to deal with a set subject area as would the Landlord and Tenant Board or the Workplace Safety and Insurance Board, to give two examples. One of the most important types of claims that the court must deal with is that of unpaid debts, or unpaid invoices for goods and services.

Most people who are not acquainted with the legal system assume that the Small Claims Court will take the unique personal situation of the parties into account when making a determination into payment of an unpaid debt. While the Court aims to make decisions that are fair and in consideration of the parties’ circumstances, it is also limited to decisions which are in agreement with the case law and the defences available to a given scenario. There are four main categories that disputes over nonpayment of a debt usually fall into, including disputes about ability to pay, quality of work, completion of work, and reasonableness of the invoice. These categories are not exhaustive.

The first category, unlike the other three is not really a category at all. It is not a legal defence for a party to claim that they cannot pay their bill; such a claim has no impact on (a Court’s determination of) liability. One notable exception to this is where a bankruptcy proceeding is concerned, but this is beyond the scope of this article or of Small Claims Court. While ability to pay is not a legal defence, it is probably the most common reason that unpaid debts make it to Small Claims Court. While a court will not excuse liability on this ground, it can address proposals for terms of payment and or grant some relief when a judgment is being enforced. Attaining partial payment or payment over a greater time period is better than no payment at all. Consequently, it is usually within both parties interest to agree on payment terms that are realistic rather than to insist on immediate full payment when that is not going to happen.

In my next post, I will discuss the three remaining common defences, being quality, completion, and reasonableness of the invoice.

 DISCLAIMER: This article is intended as general information, and does not replace the advice of a Licenced Paralegal or Lawyer. For advice on your specific case, contact Greanya Legal Services directly.

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