I have a customer who defaulted on payment. Can I sue him or her?
If you have a customer who defaulted on a payment, your legal rights are most likely governed by the contract between you and your customer. You must review the contract carefully to determine whether you have a right to sue and, if so, how you must go about doing it. Here are the things to look for.
Notice Provision: Many contracts have a built-in notice provisions with an opportunity to cure any default. This means that you cannot sue the customer until you have first given notice to the customer and an opportunity to cure the default. Many contracts allow a five-day grace period to cure defaults. Your contract may contain a different notice or default provision. You must read it carefully. Make sure to send any notices in accordance with the exact notice provision. Many times the notice provision will dictate whether notices must be mailed, emailed, sent
to the customer’s attorney, etc.
Arbitration & Mediation. Many contracts also contain arbitration and/or mediation provisions. An arbitration provision means that, instead of suing in court, you might need to pursue a claim in arbitration, which is similar to a lawsuit, only it is decided by arbitrators not by judges. If your contract contains a mediation provision, this means you must first take your dispute to an independent mediator who will assist the parties in trying to settle the dispute before it goes to court.
Venue. Assuming there is no arbitration or mediation provision, you must also look carefully for any venue provisions in the contract. A venue provision dictates where the parties must file any lawsuits that arise under the contract. Many venue provisions dictate a certain State, while others even dictate a certain County in which lawsuits must be filed.
Above all you should carefully read the contract between you and your customer before filing any lawsuit.
Please Note: McCabe Rabin, P.A. provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please contact one of our attorneys.