Payment Loss Litigation in Construction

It is important to be very careful when considering or pursuing litigation as a means of collecting payment. Often, the litigation process can be more hassle than it’s worth. Having inaccurate expectations of the outcome is one of the main reasons companies get sucked into lawsuits. These expectations may be the result of inexperience, or even promises from an attorney. Nevertheless, a realistic understanding of the litigation process and likely outcomes is essential when considering how best to secure payment.

What’s Wrong With The Law

Ask a lawyer whether you will win or lose your case and you’ll never get a straight answer. In fact, its an ethical violation for an attorney to tell you an answer, and that’s because it’s impossible to predict how the courts will interpret the law and rule upon your case. This is not simply because the law is ambiguous and subject to interpretation, but also because courts will rule inconsistently on the same legal and factual questions.

In fact, because of litigation uncertainties, attorneys are pretty uniform in their advice to accept a compromised settlement rather than to “roll the dice” in litigation. Even if you win the case, you may lose in other ways. Lawsuits cost a fortune, and it may be very difficult to collect on a judgment.

This begs the questions: How does the “Rule of Law” mean anything if there is no consistency or reliability? And further, how does this cost your company lots of money?

Litigation Is Expensive and Slow

Let’s say you are a credit professional working with a material supply company and you have a client refusing to pay. What do you do? If the client refuses strongly enough, you’ll eventually be required to start litigation to enforce your right to the debt. But wait, if you’re going to get into litigation you better review your circumstances and make sure the juice will be worth the squeeze.

Is the debt less than $100,000? Well, many lawyers won’t take on such a case. That’s because the cost of litigation typically rivals six figures if it goes from start to finish. In other words, if you want a real lawyer to take on and make a real case for you, you’re going to need to spend serious money.  If your debt isn’t large enough, it just doesn’t make fiscal sense.

Do you need the money soon?  If you need the money with any relative quickness you’re better off going ask for a loan. The reason is that litigation is likely to take months or years from start to finish, and that doesn’t count the time you’re going to spend in appeals and/or in chasing your tail to collect the judgment.

You may see where this is going.

The legal system’s disfunction leaves the fate of your business to the chance that all of your customers will always pay you. This is why credit management and securing your receivables with lien rights is so very important. When confronted with a non-paying customer, being able to file and enforce a mechanics lien may be the only real chance you’ve got.

Click the button below to get a demo of levelset‘s lien rights management platform makes securing payment on every project easy.

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