Unpaid invoices are a reality for many businesses. Sending reminders in-house does not always yield the desired result, and every day an invoice remains unpaid weighs on the financial health of a business. Those wishing to dispute an invoice can also count on legal support. A lawyer specialising in debt recovery assists businesses and private individuals, from amicable recovery to court proceedings.
Debt recovery encompasses all the legal steps taken to collect unpaid invoices. A lawyer acts in both directions: both for those seeking to recover a debt and for those contesting an invoice.
In B2B relationships, an extrajudicial procedure for the recovery of uncontested debts between businesses (IOS) can furthermore be initiated. This is a simplified out-of-court procedure enabling businesses to recover unpaid and uncontested invoices without the intervention of a court.
For businesses, placing debt recovery in the hands of a specialist lawyer is worthwhile. Every unpaid invoice demands time and resources. A lawyer takes charge of the entire process, from the first formal notice to any court proceedings. Businesses facing disputed invoices can also count on legal support.
For consumers, a debt recovery lawyer is of value when they are confronted with invoices they wish to dispute or with payment disputes. A specialist lawyer analyses the situation, determines the legal position and guides the client in finding an appropriate and effective solution.
For businesses and entrepreneurs who entrust their debt recovery contentieux of uncontested claims to FAIRWAY, FAIRWAY has developed a tailored fee structure based on pre-determined fixed fees.
The objective is to recover outstanding claims swiftly, efficiently and cost-consciously, without unnecessary recourse to legal proceedings where this can be avoided.
This method of working allows cases to be opened at a very limited initial cost, with maximum attention to swift recovery and practical follow-up.
In the case of an unpaid invoice, it is best to follow fixed steps: first a free payment reminder, then a formal notice of default, then, if necessary, court proceedings or, between businesses, the IOS procedure, and finally enforcement by a bailiff.
1. Reminder: you ask the debtor to pay the outstanding invoice within a certain period. For consumers, the first reminder must be free of charge.
2. Formal notice of default: if payment is still not made, you send a formal notice of default, by e-mail or by letter.
3. Court proceedings or IOS procedure: depending on the nature of the claim and the capacity of the parties, through court proceedings or, for undisputed monetary debts between businesses, through the IOS procedure (recovery of undisputed monetary debts) before a bailiff.
4. Enforcement: with an enforceable title, such as a judgment or a record of non-contestation in the IOS procedure, a bailiff can seize assets if the debtor still does not pay.
In addition to the invoice amount, you may in certain cases also claim default interest, damages or recovery costs. Between businesses, unless otherwise agreed, default interest is due at the reference interest rate plus 8 percentage points, in addition to a liquidated damages clause or, in the absence of a valid liquidated damages clause, a fixed recovery cost compensation of 40,00 EUR. Stricter rules apply to consumers. The exact amounts due depend on the agreement, the general terms and conditions and the applicable statutory provisions.
For a larger or disputed claim, have the recovery strategy assessed legally in advance.
The fact that a customer disputes an invoice does not automatically release the customer from the obligation to pay. If you consider the dispute unfounded, you must be able to prove the existence and the amount of your claim.
In this respect, not only the invoice itself, but also the following documents are important:
- the agreement or quotation;
- order forms;
- the general terms and conditions;
- e-mails and other correspondence;
- proof of delivery or performance.
The reason for the dispute and the moment at which the customer disputed the invoice can also play a role in assessing the dispute.
If no amicable solution is possible, you can claim payment before the competent court. The judge assesses whether the invoiced services or goods are due and whether the customer's objections are well founded. In addition to the principal amount, default interest, a liquidated damages clause, court costs and a procedural indemnity may also be claimed where appropriate.
A quick and legally substantiated response to a dispute prevents a payment dispute from dragging on unnecessarily.
You dispute an invoice by informing the sender, as soon as possible and in writing, that you do not agree with (part of) the invoice, and why. This may be the case, for example, if you have not received the goods or services, if the invoiced amount is incorrect or if costs are invoiced that were not agreed.
Always state in your dispute:
- the invoice number;
- a clear explanation of what you consider to be wrong;
- if possible, relevant documents or supporting evidence.
Registered mail is not mandatory: an e-mail is nowadays just as useful, provided that you keep proof of dispatch. A timely and well-reasoned dispute helps to safeguard your rights and to prevent further discussions.
General terms and conditions are not automatically valid just because they are on paper or have been published on a website. To be valid, they must meet the following requirements:
- they must be made available to the counterparty before or at the latest when the agreement is concluded;
- the counterparty must have had the opportunity to actually take note of them;
- the counterparty must have accepted them, expressly or tacitly;
- the provisions must be drafted sufficiently clearly and understandably.
Between businesses, terms and conditions that appear on the invoice may suffice where there is an ongoing business relationship, because the terms and conditions are then known and tacitly accepted. For consumers, this is not sufficient: the invoice only arrives after the delivery or the service, so there was no awareness and acceptance when the agreement was concluded.
In addition, additional statutory requirements and information obligations apply to agreements with consumers, and unfair terms are prohibited. Therefore draft your general terms and conditions correctly and communicate them in the right way.
In amicable recovery, you try to bring the debtor to pay without the intervention of a judge; in judicial recovery, you claim payment before the court. Between businesses, the IOS procedure also exists.
Amicable recovery includes:
- a reminder and, if necessary, a formal notice of default;
- negotiations or a payment plan;
- possibly mediation.
Judicial recovery includes:
- proceedings before the competent court;
- a judgment as an enforceable title;
- enforcement by a bailiff, for example through seizure.
The IOS procedure (recovery of undisputed monetary debts) is only possible for undisputed monetary debts between businesses and runs through a bailiff. The debtor has one month to pay or to dispute. If the debtor disputes, the procedure stops and you must go to court. If the debtor does not respond, the bailiff draws up a record of non-contestation, which serves as an enforceable title.
The amicable route is generally faster and cheaper and preserves the commercial relationship, but offers no means of coercion. The judicial route is longer and more expensive, but leads to an enforceable title, and the court costs and a procedural indemnity can in principle be recovered from the losing party. For consumers, amicable recovery is strictly regulated by Book XIX of the Code of Economic Law (WER).
Which route is most appropriate depends on the amount, the likelihood of a dispute and the debtor's solvency.
A formal notice of default is a formal, written request to the debtor to pay a specific debt within a reasonable period, announcing the consequences of non-payment.
A formal notice of default is important because it:
- proves that you formally asked the debtor to pay;
- gives the debtor a last chance to pay without legal action;
- clearly determines the amounts due (principal, default interest and costs);
- sets a clear period after which you can take legal action.
A good formal notice of default contains:
- the invoice number, the amount and the due date;
- a reasonable payment period, for example 8 days between businesses;
- the announcement of the consequences, such as default interest, a liquidated damages clause and legal action;
- dispatch of which you keep proof. Registered mail is not mandatory and an e-mail is nowadays just as useful.
For consumers, a free first reminder must have been sent first, and a period of 14 calendar days applies after that reminder. The first formal notice of default may then only contain the principal amount.
A correctly drafted formal notice of default reduces the risk of a dispute and strengthens your claim.
Between businesses, default interest is due by operation of law in the event of late payment, in addition to a liquidated damages clause from your general terms and conditions or, in the absence of a valid liquidated damages clause, a fixed recovery cost compensation of 40,00 EUR. This follows from the Act of 2 August 2002 on combating late payment in commercial transactions.
- Payment term: unless otherwise agreed, an invoice must be paid within 30 days;
- Default interest: due by operation of law from the day after the due date, without formal notice of default, unless contractually agreed otherwise;
- Interest rate: if nothing has been agreed, the reference interest rate plus 8 percentage points, which is published every six months;
- Liquidated damages clause: a valid liquidated damages clause in your general terms and conditions, for example 10 % of the invoice amount, is permitted, but the court may reduce an amount that is manifestly disproportionate to the damage;
- Recovery cost compensation: a fixed compensation of 40,00 EUR, only if no (valid) liquidated damages clause was included. You cannot claim the liquidated damages clause and the 40,00 EUR together.
A liquidated damages clause is only enforceable if it validly forms part of the agreement or the general terms and conditions. Have the calculation of interest and costs checked in advance, so that your claim stands up legally.
Stricter rules from Book XIX of the Code of Economic Law (WER) have applied to consumers since 2023: you must first send a free reminder and then allow the consumer 14 calendar days before you can claim interest or a liquidated damages clause.
- First reminder: always free of charge;
- Waiting period: 14 calendar days after the reminder, and the first formal notice of default contains only the principal amount;
- Default interest: at most the reference interest rate plus 8 percentage points;
- Coverage of the liquidated damages clause: the fixed compensation primarily covers both the default interest and the costs of amicable recovery;
- Liquidated damages clause for an outstanding amount up to and including 150,00 EUR: at most 20,00 EUR;
- Liquidated damages clause for an outstanding amount up to 500,00 EUR: at most 30,00 EUR, plus 10 % of the amount between 150,01 EUR and 500,00 EUR;
- Liquidated damages clause for an outstanding amount above 500,00 EUR: at most 65,00 EUR, plus 5 % of the amount above 500,00 EUR, with an absolute maximum of 2.000,00 EUR;
- Condition: the liquidated damages clause and the interest are only enforceable if they are clearly stated in advance in the agreement or the general terms and conditions, and a liquidated damages clause above the maximum amounts is deemed not written;
- Other costs: you may not charge other damages, not even through a debt collector;
- Collection practices: no telephone calls or home visits between 10 p.m. and 8 a.m.
What you received in breach of these rules, the court can order you to refund. Therefore have your reminder, formal notice of default and calculation of interest and costs checked.
The main difference is the degree of statutory protection: businesses enjoy broad freedom of contract, whereas consumers are protected by mandatory law.
- Content of the agreement: in B2B, the parties largely determine this themselves, within the general law of contract and Book VI WER. An unfair term between businesses is prohibited if it creates a manifest imbalance (Articles VI.91/1 et seq. WER, since 1 December 2020). In B2C, a black list of prohibited terms applies (Articles VI.82 to VI.84 WER);
- Information and withdrawal: in B2C, extensive pre-contractual information obligations apply and, in distance selling or off-premises sales, a right of withdrawal of 14 days;
- General terms and conditions: in both cases, they must be known in advance and accepted, but in B2C they are tested much more strictly;
- Competent court: a jurisdiction clause between businesses is usually valid, but towards consumers it is often null and void or only enforceable to a limited extent;
- Recovery: in B2B, the Act of 2 August 2002 on combating late payment in commercial transactions applies; in B2C, Book XIX WER.
Therefore have your general terms and conditions and model agreements drafted or reviewed separately for B2B and B2C.
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