When “Handshake Agreements” Get in the Way of Payment

A contractor contacted our office for assistance collecting from their non-paying customer for work their company completed at his customer’s property. They did not have a written agreement in place. In fact, all the contractor had was what is commonly known as a “handshake agreement”.

After confirming work was done and there was, in fact, a sum owed to the contractor, our attorney started a lawsuit to obtain a judgement. A judgement is a decision of the court that, in this case, confirms that one party owes money to another party. Upon notification that this process was started, the non-paying customer contacted our office stating they fully intended to pay the contractor and just needed time. The contractor agreed to enter into a payment plan with the customer to give them more time to pay on the condition that the non-paying customer enter into a Confession of Judgment securing the amount due.  Our client received a few payments under the payment plan before the payments completely stopped.

Our firm filed the Confession of Judgment with the Court to obtain the judgment for the client and proceeded to docket the Judgment in District Court.  Once docketed and the appropriate waiting period had passed, we then served a Demand for Disclosure which obligated the non-paying customer to complete a Financial Disclosure Form disclosing the customer’s employer, bank accounts, and assets available for collection. The customer neglected to return a completed Financial Disclosure Form, and after a lengthy process to compel them to return the Form, we obtained the customer’s information and were able to work with the Sheriff to levy some of the assets owned by the customer. Upon the Sheriff’s sale of the levied property, the net proceeds were applied to the contractor’s judgment.

Without our guidance, our client would likely not have received any payment for the work done. This process may have been simpler had a written contract been executed with the customer instead of a handshake agreement. In addition, often, a stipulation can be included in a written contract that attorney fees for collecting a balance owed will be the responsibility of the non-paying party.

Attorney fees to collect on services rendered can often exceed the cost to draft a contract in the first place. The cost to draft a contract that can be used repeatedly has a shorter return on investment, especially when faced with situations such as this example.  Call us today if you need assistance collecting past-due accounts, or if you need a contract drafted for your business or an existing contract that needs updating.