For a whole host of reasons, there seems to be a steady flow of cases where two parties enter into a business agreement and one party fails or refuses to perform – even after receiving the benefit of the deal. In these situations the aggrieved party can issue oral and written notices demanding payment or full performance, they can agree to take less than what was set in the original contract, they can wait and hope that circumstances change and that the obligor has a change of heart and pays or performs, or they can file suit in a court of law. In my experience, issuing demands can be productive. However, this is usually effective only where the owing party really intended to perform from the very beginning, but they were experiencing internal problems that prevented performance. If a company is experiencing cash flow problems, then by definition, they can’t pay all of their obligations as they come due. With a little luck, you are in line and will be paid eventually. Compromising the obligation can also be an effective way to get paid or move up in the line. However, some clients don’t like offering discounts in the face of a contract breach because it only encourages such behavior. All of these decisions vary from client to client. What is deemed comfortable or appropriate by one company may not be acceptable to another. Company culture, including the attitudes and experiences of the officers running those companies, will determine what course of action will be taken.
I typically don’t come into the picture until negotiations have failed or demand letters are ignored. For those clients, there are a few things you need to know. There is nothing magical about going to court. Rather, courts follow procedural steps to move from complaint to judgment and you either fulfill the various procedural steps or you don’t get to judgment. Once you have a judgment, you can begin the process of searching for assets and compelling the application of discovered assets toward the satisfaction or payment of your judgment. Clients who have worked with me over the years know that there are two types of cases. There are cases that I can likely win on summary judgment and there are those that cannot be won on summary judgment. Summary judgment is defined in the Code of Civil Procedure at 735 ILCS 5/2-1005. This statute provides that a court will render judgment without delay if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact. Why is this important? If a case can be won on summary judgment, the case will be resolved faster than if it went to trial. For the client, this typically means that they spent less on attorney fees. It also means that if the judgment-debtor has assets, you can get at those assets sooner as opposed to later. It is in the client’s best interest to spend less on attorney fees and to increase the likelihood of a recovery on their judgment. When you stop to consider that even straight forward commercial trials can easily cost $50,000, it is important to groom all of your commercial disputes to be won on summary judgment.
How do you increase the likelihood of winning on summary judgment? First, have a written contract. If you have a verbal agreement and the parties disagree concerning the terms of the agreement, a court is hard-pressed to enter summary judgment. If you are the plaintiff in a lawsuit, you want to file a complaint that is factually sufficient and specific concerning the essential facts of the deal and the nature of the breach or default. You want to present the court with a written agreement that is signed by the defendant. You want that agreement to be clear and you need to identify the language governing the dispute. You need to affirm to the court that you fully performed the obligations imposed upon you by the contract. You also need to present a clear chronology of events to the court and you need to have a good understanding of the parties and the witnesses. If you provide your lawyer with all of this information, he/she will be able to craft the necessary motions and supporting affidavits to present your dispute for summary resolution by the court. While all legal proceedings are expensive, prevailing on a motion for summary judgment can save substantial money, time and stress. If you have never had the need to sue someone to get paid for your hard work or product, that’s great. But if that day comes, and in my experience it probably will, you would be wise to make sure that your contracts and business practices are conducive to moving for summary judgment. If you have an attorney, ask him or her to review your contracts to make sure they are clear and protect your interests. Do you use standard terms and conditions, do your contracts have an attorney fee provision, do they have an interest provision, do they set venue in your locality, etc… Put in simple terms, you want your contract to be a roadmap for the court to follow if you don’t get paid or if the other party does not perform. If your contract does not protect you in the event of breach or default, then it needs to be rewritten.