Customer negotiating the total due and willing to Settle for 50% only

1 month ago

I am a new customer for Levelset and I appreciate your services.
I wonder if its wise to settle for 50% of what I am asking for as well as how do I document that properly so in future it is not assumed that my total invoice is the one slashed 50%.
Customer is asking for release letter based on a Pre Dated Check which I find very risky.
What are your thoughts? Thanks

Senior Legal Associate Levelset

I’m glad to have you on board! We love helping out Levelset users on the Ask an Expert Center.

That’s an interesting question. Ultimately, that would come down to a business decision and a claimant would have to determine whether 50% of an invoice is enough. That could depend on a number of variables – including the business’ margins, cash flow, the relationships of the parties involved, and a whole host of other factors. Let’s look at some of that below, as well as how to settle an old invoice with partial payment without forgoing the right to collect future invoices.

Deciding what’s a reasonable settlement on an invoice
When deciding whether or not to accept a settlement offer, it’s important to assess the leverage of the situation and to contemplate the other options. If not all recovery tools have been utilized, proceeding with those tools (or, at least showing that you’re prepared to proceed with those tools) might lead to full payment or at least a better offer. Sending a document like a Notice of Intent to Lien to the customer and to the project owner could help in that regard. Or, if a Notice of Intent to Lien has already been used, actually proceeding with a mechanics lien claim could potentially help a claimant obtain full payment.

But it’s also up to the claimant to determine just how far to take the dispute, and when might be a good time to settle for less than full payment. Plus, every project and every set of circumstances is different. So, while it might make sense to settle for less on one job, it may make sense to stick it out for a better payment offer on another. But, before deciding to take a settlement that’d really hurt the business, it might be worthwhile to use all the recovery tools available. Plus, while a customer might only be willing to make partial payment, brining the owner into the dispute and showing them that their property title is in danger might either create more pressure for the customer or even result in the owner making payment, too.

Settling an invoice without creating other problems
As for exactly how to resolve a payment dispute on an invoice, that can be tricky, too. For one – the use of pre-dated checks might be relatively common in the construction industry, but that doesn’t mean it’s a good idea. You’re right to be a little skeptical. For a claimant, there’s really no reason to use pre-dated checks, and it isn’t unreasonable to request that all documentation be legitimate. Using pre-dated checks might not always lead to issues, but intentionally manipulating the timeline of a dispute isn’t typically a good idea for a claimant – it’s probably better to use the correct dates on all documentation in most situations.

As for the terminology when accepting less than full payment – that’s crucial, too. It’s important that a claimant gives up no greater rights than intended. So, any agreement to accept less than full payment should very clearly indicate the invoice that’s being paid, and it should indicate that the acceptance of payment is specifically to resolve the payment dispute pertaining to that invoice. Unfortunately, it’s pretty common for some construction businesses to try and take advantage of situations like this – so carefully reading over any and all documentation is a must. Further, it’s a good idea to condition the waiver of rights on the receipt of payment, much like with a conditional lien waiver. When properly done, any payment rights wouldn’t be waived until payment hits the bank.

Here’s an article I think might be valuable when discerning whether settlement language is acceptable. The situation described in your question is a unique one, so it might not all *directly* apply to the situation at hand. But, I think the principles should still apply: Should You Sign That Lien Waiver? The Details Are Important

As a final note, when weighing whether or not to accept a settlement or whether to sign certain documentation, it’s a good idea to consult a local construction attorney. While I’m able to provide helpful information, they can review all of your documentation and circumstances in depth then advise on how best to proceed.

I hope this was helpful! If not, or if you’ve got other questions, please feel free to post additional questions here!

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