How to Enforce a Freelance Contract
There's a lot of talk on the internet amongst freelancers about what to do if a client stiffs you on payment. Many folks assume the simple answer is to sue your client ift they don't respond to your emails about payment, but beyond that, most folks aren't clear on what options you have to enforce a contract against a client. My goal is to give you a better understanding of what's involved in contract enforcement and why having a contract can be a huge leg up.
Here's what this article covers:
Case Study: How this consultant got stiffed on payment
What his enforcement options were without a contract
What his enforcement options would have been with a contract
Case Study: How a Consultant Got Stiffed on Payment
For our purposes, our consultant's name will be Tim. Tim has a talent recruiting agency where he helps organizations of all types recruit talent. A client hired him to fill 3 open positions and they worked out a verbal agreement where
He agreed to fill 3 open positions at the company
The company agreed to pay him a certain amount of money for each filled position, the total of which was over $30,000.
They hashed out the details via email, Tim was added to the client's Slack account for ease of communication and got to work. When he filled all 3 positions, he sent an invoice for payment as planned, but the client refused to pay.
Tim is owed more than $30,000 and wants to know what his options are for getting paid for his work.
How to Get Paid Without a Signed Contract
I won't lie to you. Trying to get paid when there's no contract can be challenging. The reason for that is twofold. First, a strategically written contract can create effective enforcement options that don't involve filing a lawsuit. Without a contract, you don't have those options. And second, if you do file a lawsuit, it's a lot of work to prove that a contract exists if you don't have something signed. Let me break down Tim's enforcement options to help you understand what I mean.
1. Send the Client a Demand Letter
When you don't have a signed contract, your first and best option is often to hire a lawyer to send your client a demand letter for the amount you're owed. When Tim came to me for help, that's what I suggested. I connected him with a service that sends demand letters on behalf of freelancers, consultants, and creators to help you all get paid. He used it, but the demand letter didn't work. The client refused to pay and held firm in their claim that there was no contract.
2. Publicly Shame Your Client
Listen, some people might say it's in poor taste, but I've seen people successfully shame their clients into paying them and when you don't have any other levers to pull, publicly shaming your client can be an effective option.
In this case, Tim did not choose public shaming, but if he wanted to go that route, he would post about how his client, who was a reputable nonprofit, failed to pay him for his work. He would tag them in his social media post and share it as a "warning" for other consultants and freelancers and see if he could leverage public pressure and the threat of potential reputational damage to get the client to pay.
3. Sue Your Client for Breach of Contract
As a last resort, Tim could sue his client for breach of contract. Given the amount of money he is owed, he would sue in small claims court, which is more affordable than regular court. If he wanted to, he could represent himself, but the time he'd need to spend figuring out what to do probably wouldn't make it worth it. Especially because without a contract, he has an uphill battle to winning a case. So to bring a lawsuit, he'd need to be able to afford a lawyer, court expenses, and the costs required to prove his case.
To bring a case for breach of contract you have to show:
That you have a valid contract
That you performed your obligations under the contract
That the other party breached their obligations
That the other party's breach of their obligations caused you harm (damages)
To prove each of these things, you have to satisfy certain factual elements. In Tim's case, because he doesn't have a signed contract, he has a high burden of proof.
First he has to show there is a valid contract, which requires him to show:
There was an offer to make an agreement;
His client accepted that exact, or substantially similar, offer;
That each party agreed to give something of legal value to the other (this is called consideration). In this case it would be him providing services and the client paying him;
That there was mutual assent to agree, meaning there's evidence of a meeting of the minds that both parties actually meant to make an agreement
That both parties had the legal ability to enter into a contract; and
That the subject matter and purpose of the contract is legal (for example, a contract to sell illegal drugs is void as a matter of public policy)
This means Tim would have to gather emails, screenshots from chats, and any other tangible evidence to show these things exist. A "he said, she said" situation probably wouldn't be enough prove there was a contract. But his client would also be gathering evidence to show that there is no contract and it would come down to whose evidence is stronger. That entire process is called Discovery in a lawsuit and it's EXPENSIVE.
This is why a lot of small business owners don't end up suing their clients. Because they can't afford it. So let's look at what options Tim would have had if he had a well written, signed contract.
Trying to Get Paid With a Signed Contract
When you have a signed contract, your options expand beyond just suing and sending a demand letter, especially if your contract is well written. Let's break it down.
1. A Well Written Contract with Leverage Gives You Options
A lot of folks think just having a contract does the trick, but I like to emphasize that a strategically written contract is where the magic happens. A contract that has terms like late fees, the withholding of IP rights until payment in full, a payment schedule that gets you paid overtime as you complete work, and built in procedures for handling disputes can help you avoid the costs of hiring a lawyer.
You can remind your client that they don't own the rights to your work until they pay you.
If they don't pay you for the portion of work you completed, you can stop work until they pay you and ask for the next portion to be paid upfront.
If they're late to pay you, you can remind them about the late fees provision.
And if they refuse to pay you, you can remind them that they're required to submit any disputes to mediation per the contract.
These little leverage points in contracts create cost effective options for getting paid when you're dealing with a client who refuses to pay. Without these leverage points, sometimes your first and best option would still be to send a demand letter.
2. Send the Client a Demand Letter
Just like before, if none of the above options work, you can hire a lawyer or legal service to send a demand letter, only this time the letter will have more oomph because you've got a signed contract. The lawyer can also reiterate some of the leverage points in the contract to remind your client that this is not something they want to litigate because they're more likely than not to lose. In Tim's case, not having a signed contract made his demand letter less threatening because his client knew he'd have to actually prove there was a contract so they called his bluff.
3. Publicly Shame Your Client
Hey like I said before, public shaming might be in poor taste, but it can also be effective, which is why it's still an enforcement option with a signed contract.
4. Sue Your Client for Breach Of Contract
If you decide that a lawsuit it the right route, then having a signed contract puts you in a better position because you don't have to spend so much money proving that there's a contract. I won't bore you with the nitty gritty legal details, but having a signed contract lets you take advantage of certain procedural rules that make it easier to establish the existence of a contract.
Conclusion
The options I listed out above are some of the more popular options for enforcing a contract when a client refuses to pay. The key thing I want you to understand is that having a contract is important, but having a contract strategy that builds key leverage points into your contract can be the difference between a lawsuit being your best and only choice for getting paid and having the ability to enforce a contract all on your own without having to hire a lawyer.
To learn how to build leverage into your service contract, you can check out my Fix-Your-Template Guide.
