Navigating the Texas Contracts: Key Contract Terms for Collecting Accounts Receivable
When you perform work in Texas, you should be paid for it. Knowing what key terms to include in your contract can make a world of difference in the collections process and is crucial to resolving disputes effectively and legally in your favor.
Consider adding these key provisions to your contract:
Identify the Parties
At the beginning or the end of your contract clearly identify who the parties to the contract are. If contracting with a business, consider adding a sentence stating that the authorized representative of the business is signing on behalf of the business and has the authority to do so. Regardless, it is imperative that the parties are clearly identified so the contract is enforceable against them. Consider adding “signature” and “printed name” lines, for each party to the contract as well as a date signed line for clarity.
Describe payment terms clearly
Include precise terms related to how, when, and where payment should be made for the services you provide under the contract. For example, if you plan to perform work and then issue an invoice for the work performed, your payment provision should identify whether payment is due upon receipt of the invoice, or within a time-frame after receipt, such as 30-days. Consider also adding a term that any invoices that are not paid as specified in the contract will be considered a breach of the agreement and will entitle you to certain remedies (cancellation, acceleration of the debt owed, etc.).
It can be advantageous to also add a provision that if payment is not made in accordance with the contract, the breaching party will be liable for all fees incurred in collection, including attorneys’ fees. This can help you down the road should you have to initiate legal action, as you will be entitled to recover your attorney’s fees, something you may only do in Texas if the contract provides for it. Finally, consider adding a provision that any past-due amounts will incur interest at the highest allowable rate at law.
Document work performed and approval of same
Often, a party refusing to pay for work performed will claim they are not required to pay due to issues with the work performed/product received. You can help combat such claims by documenting every stage thoroughly. This may include obtaining signed estimates or tickets for the work to be performed, obtaining written approval of any change orders to the contract, taking photographs of the work performed, etc. These documents will strengthen your claims should you need to take additional action to enforce the contract due to non-payment. Showing that the other side received the value of your services without paying for them is crucial for maintaining your position and defending against any claims of offset.
Add a notice deadline for defects or issues with work
Consider adding a clause to your contract requiring any disputes regarding the work performed be made in writing within 10-15 days of the work being performed or receipt of the invoice. If no disputes of the work are made, make clear that the work is deemed to be acceptable by the other party and they may not withhold payment of the account for this reason. Also consider adding language that even if a dispute arises, payments for all portions of work not being disputed must still be made. This way you are guaranteed to receive at least partial payment for the services performed.
Having clear contract terms encourages good-faith resolution, prevents miscommunications and empowers you to operate clearly and effectively with others. Consult with the experienced lawyers of Allen Bryson Lamar, PLLC, if you need help with drafting a contract for your specific purpose or collecting on an account which has gone delinquent.
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