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Guide: Client Refuses to Pay a Contractor

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Last editedApr 20222 min read

If you’re a contractor, getting paid can be a challenge, especially if you have to chase clients for payment weeks or months at a time. While frustrating, late payment is often due to error, not malevolence. Knowing what to do in order to get paid by a client is an essential skill that all contractors should know.

In this post, we’ll discuss why a client may refuse to pay a contractor and offer up some tips for handling this type of situation.

Reasons why a client refuses to pay contractor

When a customer won’t pay a contractor, it could be down to any number of reasons, from a misunderstanding or error to deliberate fraud. It could also be because a client feels that the work was substandard or the finished service wasn’t what they were expecting. In addition, a client may refuse to pay because the contract wasn’t clear about the terms and conditions, leading to poor communication down the line.

If fraud is suspected and a client is simply trying to avoid payment for no good reason, then it’s important to know your legal rights.

When a customer won’t pay a contractor, it’s time to act

It’s essential to understand why a client refuses to pay a contractor, so communication is key. A face to face conversation is the best way forward, and preferable to speaking on the phone or electronically. Asking the client directly what’s gone wrong will help to clarify the situation.

Once the client has revealed their reason for non-payment, it can help to relay back to the client what they have said. For example, if they believe that the quality of materials used weren’t up to scratch, ask “So, you feel the materials used were of a poor quality?”. This way, both parties know exactly where they stand.

Always aim to resolve an issue in a non-confrontational way, if possible. A client may be withholding money in a bid to get an issue fixed to their satisfaction, so dedicating more time and materials to doing this may be the best course of action. When it comes to collecting payment from a customer, offering a discount could be another solution. Discuss these possibilities before taking legal action.

Taking legal action when a customer won’t pay contractor

If all other means have been exhausted, the only option is to take the case to a small claims court. It’s recommended to speak to a lawyer beforehand to get an idea on costs and whether it will be worth doing.

If you don't have a contract in place, an oral agreement can suffice. But to be on the safe side, always aim to have something in writing before commencing work. A good written contract will detail all aspects of the work and provide proof that both parties have agreed to the terms as set out.

Without a written contract, the question of who’s at fault becomes much more murky: it’s basically the contractor’s word against the client’s. Unless the quality of the work is obviously poor, the court will generally rule in favor of the contractor who hasn’t been paid. In some instances, however, the lines are blurred and the outcome inconclusive.

How to prevent situations where client refuses to pay contractor

Be selective about who to work with: Make sure to only work with trustworthy clients.
Get everything in writing: The best way to prevent problems is to have a written contract that’s been reviewed by a legal expert.
Ask for a deposit: It’s common practice to ask for a fee upfront before commencing work, which will remove some of the risk of non-payment. Deposit fees vary according to industry, but asking for a 50% deposit is not out of the question.

When a client refuses to pay a contractor, it can have serious repercussions for a business. In order to avoid this situation, it’s essential to lay the ground rules before work commences, and make sure that everything is documented in writing.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.