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Our client sends their checks late after invoices. Is this a breach of contract in Michigan?

MichiganSlow Payment

Anonymous Contractor

On our contract we had a 30 net for pay. We would send invoices at the end of the month but would never get the check unto beyond the 15th. Is that a breach of contract Also we had a 30 days cancel clause in our contract and they lock the doors and gave a 30 letter that we are done. Do they owe us for those 30 day?.

1 reply

Matt Viator

Construction Lawyer

Levelset Admin at Levelset

| 1,010 reviews

Mar 23, 2020

Any time that someone acts out of line with the contract, that will generally be a breach of the contract. However, not every breach is what's called a "material" breach. And, minor breaches in the contract generally won't set the table for a termination, and they might not even entitle the non-breaching party to relief, depending on the nature of and fallout from the breach of the contract.

Breach of contract and termination

Failure to follow the necessary termination procedures often constitutes a serious breach of contract. When there are specific terms in the contract laying out how and why the contract can be terminated, those termination provisions must be strictly followed. And, failure to follow the required termination procedures may well constitute a material breach, and it might even result in significant damages. That happened with a contractor in this recently published article: Improper Termination Notice Costs GC Over $26M

Does slow payment constitute a breach?

Slow payment can absolutely result in a breach of contract. But, unfortunately, slow payment is also kind of the way of the world in construction. So, to some degree, slow payments are accepted as the norm. Still, when payments are particularly slow, or when they're being unreasonably withheld, then it could be a material breach. Even if the breach isn't material, the slow-paying party could be on the hook for late fees, interest penalties, etc. It's probably worth reviewing the contract before jumping to any conclusions, though. It's possible there are specific payment terms allowing for delayed payments. And, consulting with a local Michigan construction attorney would help to clear things up.

Recovering slow payments without a lawsuit

There are quite a few different recovery tools that may be worth exploring before deciding to proceed with a lawsuit. Let's look at a handful of them, starting from simple methods and moving toward more-adversarial tools.

Invoice reminders

Sending something as simple as an invoice reminder can lead to payment. Invoice reminders are just like they sound - they act as a reminder that payment is outstanding, and they serve to nudge a customer to do the right thing and pay what's owed. Granted, if there's an all-out payment dispute at hand, a simple reminder might not move the ball very far.

Demand letters

Sending a payment demand letter can turn things up a notch. Demand letters will generally include some legal threats to be undertaken if payment isn't made. And, by sending a demand letter and putting a deadline on payments, you can let your customer know that you're willing to do what it takes to make sure you're paid.

Notice of Intent to Lien

Mechanics lien claims are a powerful tool for payment recovery and speeding up slow payments. And, because of that, the mere threat of a lien claim is powerful too. By sending a Notice of Intent to Lien, a claimant can let their customer and the property owner know that nonpayment won't be tolerated and that, if necessary, the property will be liened to ensure payment.

Filing a mechanics lien

Mechanics liens are the most powerful tool for forcing construction payment. But, they're really a last resort. Still - if push comes to shove, a lien claim can get the job done. For more on filing Michigan liens, these resources should be valuable: (1) Michigan Mechanics Lien Guide and FAQs; and (2) How to File A Michigan Mechanics Lien – Step By Step Guide To Get You Paid.

Sending the debt to collections

Sending a debt to collections will mean foregoing some of what's owed. But, for some, it may be worth it to get something. If collectins seems like a viable option, you can reach out to a Michigan construction collector here for more information.

The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not
act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the helSee More...See More...

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