
Are you looking for a lawyer for debt recovery litigation in Montreal? Our lawyers regularly advise and represent entrepreneurs, businesses, corporations, SMEs, and self-employed individuals in legal actions for unpaid accounts. We focus on building strong cases to enhance your chances of success in court and facilitate the swift enforcement of your financial claims. Our firm also collaborates with private detective firm and bailiffs for the effective execution of judgements and the recovery of owed amounts.
Our Services for Debt Recovery Litigation and Demand Letters
Our debt recovery lawyers assist you through the various legal steps and procedures:
- Legal consultation
- Legal advice and opinions
- Strategic recommendations
- Preparation and drafting of demand letters
- Negotiation of payment agreements
- Preparation of legal proceedings
- Court representations
- Assistance with judgment enforcement
Effective Strategies for Debt Recovery and Prevention of Unpaid Accounts
Effective Strategies for Debt Recovery and Prevention of Unpaid Accounts
If you are a small or medium-sized enterprise (SME) or a self-employed worker, you have worked hard to build your clientele, your reputation, and you are proud of the services or products you sell to your clients. You may have also advanced sums of money in a business context or to someone close to you. There is nothing more frustrating than having invested time and money only to find that you remain unpaid.
Our debt recovery lawyers can represent you in court or advise you to help you recover the sums owed to you, whether it be in Superior Court, Quebec Court, or the Quebec Court's small claims division. The key to successful debt recovery for unpaid accounts or borrowed sums is having a signed contract in place and implementing effective debt recovery strategies.
To minimize the occurrence of unpaid accounts or unreturned loans, it is essential to implement solid business practices. Effective management of your invoicing or lending is crucial. Developing clear policies for billing, payment for services or products, and account recovery is key to managing cash flow and reducing the risk of unmanageable debt.
The cornerstone of these practices is the execution of a written contract. Whether it is for a service, sale, or loan, the contract should be drafted in clear, understandable language, explicitly outlining each party’s obligations. Businesses and self-employed professionals use standard templates for their clients during commercial transactions. A well-written and duly signed contract not only streamlines your process but also significantly facilitates your work or the work of your lawyer in recovering the amounts due in court.
Below, we outline methods to help you avoid potential complications.
The Written Contract
The Written Contract
A written contract will be useful if you find yourself in court, but it is primarily the best tool to avoid such a situation. Before rendering services or delivering sold products, the contract will serve as a reminder of each of the stipulated obligations, such as:
- The price (or loaned sum for a loan contract)
- Inclusion or exclusion of taxes
- The mandate, description of services, or products sold
- The timeline for delivery of completion
- Guarantees (e.g., personal surety by a company representative)
- Conditions under which either party may terminate the contract
- General clauses (e.g., applicable law)
- Special clauses (e.g., arbitration clause)
- Consequences for non-compliance with the written contract
More specifically, the following clauses are included:
- The title, reflecting the actual content of the contract (e.g., service contract, loan contract, sales contract).
- Identification of the parties, with detailed descriptions (company name, representative’s first and last name, the law constituting the company, residential address, business address or head office, etc.). To simplify the text, parties may be designated by a word or two or by initials (e.g., « hereinafter referred to as « the Client' » »).
- The purpose of the contract should be described precisely to avoid any ambiguity for the reader.
- Consideration, often monetary, indicated along with payment terms, if applicable.
- General or special provisions include specific clauses related to the contract (warranties, personal guarantee, applicable law, territory applicable in case of dispute, mediation, or arbitration, etc.). Here, the rights and obligations of each party are clearly expressed.
- The effective date of the contract determined by the parties. It can be upon signing or a later date (or even retroactive when allowed by law!).
- Duration: The contract may be for a fixed term or indefinite. It often includes a renewal clause, which can be automatic or upon written notice.
- Termination of the contract: Reasons and applicable notice periods for termination must be specified.
- Signatures: The contract specifies the number of original copies, the place, and date of signing, after which the parties or their authorized representatives sign each copy.
Payment Terms
Payment Terms
To avoid personally financing significant amounts, it is wise to establish client payment terms. Each industry, business, and individual situation deserves special attention. Payment terms can vary and be tailored according to the requirements of a specific contract. For example, you could:
- Establish that rendered services are payable within 30 days of the billing date
- Offer a discount, e.g., 2% if the invoice is paid within 10 days instead of 30 (2/10/30 formula)
- Request an advance on fees or a deposit on the invoice. Depending on the profession or business sector, this sum may need to be deposited in a special account (e.g., in trust)
- Stipulate that any payment delay accrues interest at a specific rate, such as twelve percent (12%) per annum
Expenses or Disbursements
Expenses or Disbursements
By clearly explaining your reimbursement policy for expenses incurred during the execution of a contract, you will avoid disagreements and unpleasant surprises.
Here are some examples of reimbursable expenses:
- File opening fees
- Administration fees
- Materials or equipment supplied
- Your travel expenses
Remember that there is no pre-established policy for disbursements. Make a list of what you want to be reimbursed for and negotiate it with your client.
Billing
Billing
The invoice is a document that reflects the agreement between your client and your business. The information on it should be easily readable and understandable. It may include:
- The date of billing
- Invoice number
- Your company's and client's contact details
- Description of services rendered, or products supplied (for services payable at an hourly rate, indicate the number of hours and multiply by the hourly rate)
- The Quebec Sales Tax (QST) and Goods and Services Tax (GST) numbers
- The amount before tax, the amount of tax claimed, and the total including tax
- Payment terms
Courtesy Notice or Reminder
Courtesy Notice or Reminder
Different circumstances may necessitate sending account statements or written reminders to one or more clients for payment.
While it is not legally required to send a courtesy notice or reminder, this step can sometimes facilitate payment. However, if you feel that the relationship with your client has deteriorated beyond repair, you have the option to issue a formal demand letter or proceed directly with legal action.
Article 1 of the Code of Civil Procedure states that parties must « consider the use of private modes of prevention and resolution of their disputes before addressing the courts. » This means that as much as possible, you should try to settle the claim amicably, if there is a real intention on the part of your client or borrower to reimburse you.
A courtesy or reminder notice is a good first step to determine why the client has not paid: simple oversight, temporary difficulties, disagreement over the price or services rendered, etc. Payment delays can sometimes be due to a lost invoice, misfiling with paid invoices, the slowness of the accounting department in large companies, or simply an oversight by the client. Alongside courtesy notices or reminders, it may be beneficial, if the contract allows, to slow down or stop the execution of services or refuse new orders from the client or requesting immediate payment before performing the next phase of a contract.
These good collection practices can sometimes avoid the intervention of a debt recovery litigation lawyer. With the adoption of the new Code of Civil Procedure, the courts will appreciate that you have attempted to settle your situation amicably before initiating a civil action in court.
If telephone reminders or written reminders do not result in the recovery of what is owed to you, you must start preparing a collection file. At this stage, the relationship with the client can still be preserved. Therefore, it is unnecessary at this point to assert factual or legal arguments, and it is simply a matter of reminding that an amount is due, also indicating the incurred interest and penalties, if applicable.
In many cases, this is sufficient. However, if after several courtesy or reminder notices, there is no satisfactory payment, you may need to consider sending a formal demand letter.
The Demand Letter
The Demand Letter
A demand letter is more than just a letter. It marks the start of a collection process that could eventually be brought to court and lead to a judgment. Unlike courtesy or reminder notices, a demand letter is a formal warning to pay the person who owes you money, failing which legal action will be initiated.
Under the Civil Code of Quebec, a demand can impact the fulfillment of contractually stipulated obligations, including the payment of the sum due, the termination of the contract, and even the calculation of legal interest and additional compensation.
A demand letter sent by registered mail or by a bailiff should:
- Indicate the amount due and under which contractual or legal obligation
- Request settlement of the debt or unpaid account
- Mention incurred interest, fees, and applicable penalties if any
- Set a deadline for the payment of the debt or unpaid account
- Mention to whom and at which address the payment should be sent
- Typically, it is advisable to include the term « demand » in the letter’s content
Other valuable information may or sometimes must be added to the demand letter. That is why it is important to consult a debt recovery lawyer before sending out a demand letter.
The Legal Claim
The Legal Claim
If your demand letter does not lead to a resolution and you are considering legal action, be aware that in Quebec, there is a three-year limitation period for filing a lawsuit, starting from the day the debt became due. It is crucial to act within this period. Waiting too long could result in your claim being barred by this limitation period, making it legally unenforceable. Acting promptly ensures your legal rights are preserved and the debt can be pursued in court.
For your legal action to recover a debt or an unpaid account, your debt recovery litigation lawyer will need the following documents:
- The written contract
- Proof of the unpaid rendered services or sold products (e.g., timesheets)
- Unpaid invoices
- Payments made, if any
- Relevant email exchanges, SMS, or written documents.
In Quebec, the amount of your claim is a determining factor in deciding which court will hear your case. The Quebec Court hears cases where the value of the claim is less than $75,000.
- If your claim is $15,000 or less, your case could be heard in the Small Claims Division.
- For claims ranging from $15,000.01 to $74,999.99, your case falls under the authority of the Quebec Court.
- If your claim is between $75,000.00 and $99,999.99, you have the option to choose between the Quebec Court and the Superior Court of Québec.
- Claims of $100,000 or more are under the authority of the Superior Court of Québec.
Regarding the venue for your action, in principle, a lawsuit is filed in the judicial district where the contract was concluded or in the district where the business of the person you are suing is located.
You can also voluntarily reduce your claim to $15,000 if you wish to present your case to a Small Claims Court judge. This option allows for less formality and means saving on representation costs for less complex cases. Of course, some cases are more complex or warrant a faster hearing, and it might be advantageous to present the case to the Quebec Court even if the claim is just slightly over $15,000.
If the contract mentions a surety, you can also include the surety in the lawsuit to increase the chances of being reimbursed the amount due under the judgment to be rendered.
Enforcement of the Judgment
Enforcement of the Judgment
Once the judgment has been rendered, the defendant has thirty (30) days to comply with the judgment, such as the payment of a sum of money with interest and court costs. If after this period, the defendant still does not pay, you can then consult your debt recovery litigation lawyer to evaluate the different options to obtain a complete or partial payment of the judgment. You have ten (10) years to execute it for the sum due to be paid in full, including interest and court costs.
Seizure after judgment can be an interesting option and will require the intervention of a bailiff. There can be a seizure of the defendant’s assets and even their salary. Certain tools exist to evaluate the assets subject to legal seizure, including the Register of Personal and Movable Real Rights (Registre des droits personnels et reels mobiliers or RDPRM).
There are other means to obtain payment. For example, a mortgage can be registered on the defendant's house in the Quebec Land Registry (Registre Foncier du Québec).
Whatever your situation, it is important to consult a debt recovery litigation lawyer to obtain help and legal advice and support throughout the procedures.
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