The importance of checking both the contract terms and your evidence before escalating a dispute to Court…

A recent English case highlights a basic business issue for New Zealand businesses. The dispute involved a supplier in the UK seeking the equivalent of NZ$416,000 in unpaid invoices. The supplier issued court proceedings against the buyer.

The case seemed straightforward as the buyer had stopped paying for deliveries for months. The parties had a clear contract in place, and the supplier’s ledger matched every invoice.

The buyer did not dispute their liability to the supplier for breach of contract but they disputed the outstanding amount.

The contract term regarding pricing stipulated “…rates as agreed and confirmed in writing per delivery” by the parties.

However, in court the supplier failed to prove how the invoices were calculated. This was because they lost most of the rate confirmations from the buyer due to an email migration problem.

As the supplier could not find sufficient evidence to prove the amount they lost the case despite having a strong contract.

Three Checks before Seeking Litigation

If you would like to recover a debt through court proceedings it is important to check your contract terms and your evidence before commencing litigation.

Document the calculation method

You should check whether the contract terms are sufficiently specific to prove your right to recover the debt and the method of calculating any unpaid invoice. This will enable you to clearly explain how each invoice amount was calculated under the contract.

Confirm that evidence of what the agreed rates were exists in writing

If the contract requires written confirmations of agreed pricing, ensure those records are available. If your business undergoes restructuring or a system upgrade, ensure that all relevant information is properly retained during the transition period.

Verify the evidence is retrievable

This case reaffirms that evidence is essential to support your claim. If proving the claim requires digging through archived systems or deleted mailboxes, the case may already be at risk. You should carefully consider the strength of your evidence before issuing court proceedings.

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