A contract usually consists of obligations entered into between two or more parties. A simple supply of services contract will oblige one party to that contract to perform a service to the other party. In return, the other party will be obliged to make payment to the party that has provided the service. All too often, payment for services rendered is not made and the provider is left out of pocket.
Complications can arise when determining who is responsible for the debt owed. A party to a contract can exist in several different forms, for example; a person and a company are two distinct separate legal entities.
Many small businesses operate as sole traders or partnerships. The rules that govern civil proceedings state that a claim should be made against a partnership as a whole where a partnership is the debtor. This gives a claimant a greater range of recovery options in such an action because the individuals that comprise a partnership are jointly liable for all of the obligations of the partnership.
For example, a claim against an individual partner may succeed, but enforcement of the judgment against the partner may prove futile because of his or her personal financial circumstances. In many circumstances a fresh claim could be issued in order to recover sums from the other partners who were not parties to the original proceedings. This will result in further expense in respect of additional court fees and legal costs, which may or may not be recoverable. It is invariably better to sue the partnership to avoid any potential problems and to avoid the possibility of wasting costs and fees
A claim issued against the partnership at the outset will allow a claimant to recover sums owed against the partnership’s business assets and the personal assets of the partners. Therefore, when considering whether to issue proceedings, it is important that a claim is made against the correct debtor(s) because an incorrectly issued claim will incur additional costs and further delay recovery of the outstanding sum, if the recovery is not prejudiced completely.
If you are in any doubt as to how to proceed in a claim or would like any other advice in relation to dispute resolution please contact Ben Jones in our dispute resolution team on 01872 265100 or drt@stephens-scown.co.uk.