Posts Tagged ‘Wolfe Law Group’

Commercial Debt Collection – How Do I Collect When A Company Owes Me Money?

 businessman with financial symbols coming from hand

In today’s business culture we call businesses working with other businesses B2B. It has always been a popular practice to the alternative, business to consumer. The rules are different governing B2B as opposed to B2C. The legal and business world assume that the B2B relationship and players are more sophisticated.

This post discusses what happens when the B2B relationship sours and one company must collect what it is owed from another company. The most important distinction between the rules of B2B and B2C is that consumers are much more protected by government regulation. The Fair Debt Collection Practices Act protects the consumer, not businesses.

Phases of Collection

Most business think that when an account is overdue, then they call up a debt collection agency and the debt will be collected or its deemed bad debt. Businesses write off huge percentages of accounts receivable every year based off this flawed thinking.

There are at least two phases of debt collection, each of which could arguably be broken down into subcategories. You have a pre-debt fact gathering and document filing stage, as the first phase. Then there is the actual debt collection which can consist of many different options and this occurs after the debt is due. So more of a pre/post mindset.

Pre-Collection Phase – Getting Your Ducks In A Row

The pre-collection phase is often over looked and much more important than the post-collection phase. It is the foundation for the collection. This is the fact gathering and organizational portion.

This phase includes the initial fact gathering on the business. Your business should have an in-take sheet whereby it gathers all important information from the other business. Some of my clients even go as far as running credit checks on the business or getting personal guarantees from its senior members.

For contractors, suppliers and equipment lessors that I represent, this pre-collection phase is essential to keeping the accounts receivable low. This phase also includes sending out notices and filing liens, in a timely manner and properly. All of these essential elements make the post-collection process much easier, more efficient and most importantly successful. The old adage that I preach, is an ounce of prevention equals a pound of cure.

Finally another important aspect of the pre-collection phase is a well written contract between you company and your business client. This contract should have specific default and attorney fee provisions.

Collection Phase – It’s Time To Get Paid

Now your company has all of its intake information, gathered credit reports, personal guarantees, sent your notices, filed your liens, and have a well written contract, but your business client refuses to pay on its obligation to your company, what do you do?

There are a few options here and  only one good solution. Your business could write off the debt, it could try to collect internally, hire a debt collection agency or contact an attorney to collect. Obviously I’m biased here, but I do see this often. Writing off the debt is never good. Collecting internally can be okay but its slightly less successful than a debt collector. Attorneys can do all of the following steps which make the percentage chance of collection go up.

Your commercial debt collection attorney has a number of weapons at his disposal to collect on the outstanding debt. Many of them have time delays built in by law, which slows the process. First is to send a demand letter which includes the Louisiana Open Account Statue language. This is another avenue to get attorney fees and costs associated with the debt collection.

After the demand letter is sent out and thirty (30) days elapse, then its time to file suit against the debtor. Many businesses balk at this option because litigation can be costly and risky. Depending on the size of your debt, you attorney will likely take it on contingency which will minimize the litigation costs. From there your attorney will get a judgment, either by default or after trial.

Once the judgment is obtained, there are a number of possible means of collection. The attorney can examine the assets of the debtor, in a judgment debtor rule hearing whereby the debtor will be sworn-in and give testimony as to what the business owns. Further, the attorney can garnish banking and physical assets of the business. The judgment will be good for ten years and can thereafter be reinscribed. Once a judgment is granted collection chances go up.

Conclusion

In the end, some debts are simply bad and cannot be collected. Others, however may just be tricky or require persistence. Having a good commercial debt collection attorney at your side will greatly increase your collection rates and keep your accounts receivables low.

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Get An Attorney To Read Your Construction Contract – Every Time

read-construction-contract

At the start of every construction project you sign a stack of papers that will dictate your success or failure on the project: the construction contract.  The contract may be short and sweet, or it may be a mountain of paperwork that not only includes its own provisions but also cites provisions in other paperwork stacks.

Construction contracts are historically confusing documents and they contain a bunch of popular provisions with confusing interpretations like pay when paid clauses, indemnity provisions, claim notice requirements, and more. Plus, the provision may mean one thing under one state law and something completely different under another state’s law.

What can you do?

Get An Attorney To Review Every Contract

Last year, Seth Smiley wrote an article on our blog suggesting that with construction contracts you should “pay now to save later.” The point of this title and article simply underscored the importance of spending a little time with the contract language at the very start of the projects.

Perhaps your company actually pays money for an attorney to review the contract, or maybe they pay by putting in some quality time to review the document themselves. Whatever the case, it’s important to give construction contracts serious review before starting to work underneath it.

Having an attorney review your construction contract does not need to be complicated. In fact, here at Wolfe Law Group, we offer a flat fee for contract review services. Provide the contract documents to us, and we’ll turn around a review in a day or two. The review will include an opinion letter that sets forth two major things:

  • Provisions that should be concerning and perhaps changed (i.e. Alerts)
  • Provisions that require you to perform certain actions during the course of the project (i.e. Notification Lists)
  • Answers to any specific questions you may have

Having an attorney review your contract at the onset of a project will give your company peace of mind about their duties under the terms, and will help your company avoid bad situations.

Don’t Underestimate The Power Of The Contract

It’s unfortunate, but a lot of companies spend a great deal of time preparing their bid and selling their company to get a project. When they finally get the job, the salesperson, estimator, or business owner is ecstatic and just wants to get started. That’s understandable, but don’t allow the owner or general contractor to take advantage of your position and pass you a construction contract that is one-sided against you.

A strong contract that has provisions to the owner’s or general contractor’s favor can be crushing to a business in the event of a dispute, payment delay, or more.

Don’t let your excitement or desire for the project get ahead of you. General contractors and owners will negotiate a contract with you, and they expect push back on certain terms. If you allow them to roll over your company, however, they will.

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Construction Contracts – What is My Scope of Work?

English: Contractor-led design-build, architec...

(Photo credit: Wikipedia)

The importance of your construction contract cannot be understated. Surprisingly, people on all ends of the contracting process don’t always understand the importance of the words chosen in their agreement. Whether you’re a general contractor, subcontractor or homeowner, you should be familiar with all aspects of your construction contract. Most importantly, you should be able to understand and answer “what is my scope of work?”

What is the Scope of Work Generally

While this might not seem like a difficult question to answer, it often times lies at the heart of any construction litigation: determining what the scope of work on a particular project is, generally. The scope of work section of a construction contract varies greatly. Here at Wolfe Law Group, we have pretty much seen them all. These provisions can range from the incredibly vague and brief (I’ve seen scope of work provisions that are just two bullet points), to the exceptionally detailed and verbose. Regardless of the length or detail of this construction contract provision, the scope of work section generally serves one overarching purpose: it establishes the duty owed by one party to another.

This is the first answer to “what is my scope of work?” It is the basis of your contract. Without it, it would be impossible to determine where a contractor’s liability  begins or ends. Of course, this is the general “contracts law” answer. After realizing the general importance of this contract provision, we then are able to see how we can manipulate those terms in order to have the most efficient contract possible.

What is the Scope of Work Specifically

As we have written before, the scope of work provision in each contract can, and should, vary. This variation will make a great difference depending on your status in the construction project. A general contractor, for example, benefits from a vague scope of work provision in its subcontracts, but would want specific provisions in its general contract. The subcontractor, necessarily, would want a very specific scope of work provision in its subcontracts. A homeowner would likely want the terms of the general contract to be as vague and inclusive as possible. Why? The short answer: liability.

As stated above, the scope of work provision serves as the basis of your contract. As such, it establishes the rights between the parties with regards to what work is expected and promised. The specificity of the scope of work provision, then, directly relates to a party’s liability. The general contractor would not want to sign a general contract with a broad, open-ended scope of work because then the homeowner could read much further into the provision than was intended. Should a conflict arise, the general contractor wants those terms to be as narrow and precise as possible so that they are not “on the hook” for much more than was anticipated. This mindset is what governs the scope of work determination in subcontracts as well. There, the general is going to want the broad terms so that the subcontractor is potentially responsible for more than they intended. It is important, therefore, to outline your scope of work deliberately and specifically, because it will be a determining factor in one’s liability to another party.

Extra-Contractual Provisions

Rarely, though, are contracts permanently fixed and limited to its original terms. Certain instances do arise where changes are made to the contract as the work progresses. Those become part of the scope of work as you continue working, and will dictate one party’s liability to another should a conflict arise. Sometimes, there are third party agreements that people wish to be considered part of a contractor’s scope of work. I mention this because of how frequently this situation has been coming across my desk with regards to the Hazard Mitigation Grant Program (HMGP).

While the HMGP warrants a whole blog to itself (not just a post, but a WHOLE blog), there is one particular provision that I have had numerous parties contact us about here at Wolfe Law Group: scope of work. Through the program, a contractor would execute an agreement with the homeowner which contained the scope of work. The difference, though, is that these two parties are not the only parties to ultimately define what that scope of work actually is! Instead, the HMGP has a separate scope of work that was/is eligible to receive grant payments. This is causing some severe issues between contractors and homeowners because people are not sure what they are responsible for and owners are not sure what they are entitled to. These problems could be resolved if parties paid closer attention to their scope of work provisions.

The short answer is that HMGP will pay for items contained in the general contract’s scope of work that is contained in the HMGP scope of work guidelines. Anything beyond that will not be eligible for payments. However, contractors need to be careful because even if the terms of their scope of work are not included in the HMGP scope, they are still bound by their contract with the homeowner. It’s a very tricky situation that involves various presumptions, but it is a reality. The best advice I can give to deal with issues as complicated as the scope of work is the advice I give all the time: contact an attorney that handles these things. It’s your safest bet.

 

 

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Posted in:     About Our Services, Construction Contracts, Construction News, Litigation  /  Tags: , , ,   /   1 Comment

Louisiana State Licensing Board for Contractors (LSLBC)- Not To Be Taken Lightly

Senate Judiciary Committee Hearing

(Photo credit: Talk Radio News Service)

In recent weeks, I have seen a spike in the number of issues coming across my desk that directly involve the Louisiana State Licensing Board for Contractors (“LSLBC”). While every situation has its own idiosyncrasies, when you find yourself being called to appear before the LSLBC, chances are very good you have a licensing problem. Here at the Wolfe Law Group, we have posted about Louisiana licensing law numerous times and have counseled numerous clients regarding their particular license issue. However, we have not really gone beyond the procedural legalese and really explained why the LSLBC is not to be taken lightly.

What is the LSLBC?

For many contractors, the first experience they have with the LSLBC is when they receive a letter from the LSLBC notifying them of a hearing they must attend because they have been accused of violating one of the statutes under the LSLBC’s jurisdiction. I know, that statement is just full of things “legal.” However, it is essential to understanding what the LSLBC is and why it should be taken seriously.

The LSLBC is an arm of the state government. It is not a court. This explains why many people are a little surprised when they are called before the LSLBC for a “hearing.” Even though it is not a court, since it is an agency of the state, it has been granted all of the powers to regulate aspects of the construction industry in Louisiana. Most importantly, this includes the power to punish those who violate certain statutes, particularly with regard to licensing requirements. This was a point of concern for one client recently: if the LSLBC isn’t court, how can it have jurisdiction over my company and fine us? The simple answer: it has jurisdiction over your company because you did work in this state and this state says that it has jurisdiction over your company. It has been this way since 1956, when the legislature created the LSLBC as it exists today, along with all of the rules that the LSLBC is charged with enforcing. All of which can be found in Louisiana Revised Statute 37:2150 et seq.

Any person that performs construction work in the State of Louisiana is subject to these provisions, and any person or company that performs work in this state that is not licensed is subject to punishment. This is why it is so important for contractors (especially out-of-state contractors) to get licensed or certified before beginning work in Louisiana. If you do not, it is the LSLBC that will come calling.

Who is the LSLBC?

The ladies and gentlemen that make up the LSLBC generally have two things in common. First, they are appointed by the Governor to sit on the Board for terms up to six years. Second, they have experience working in the construction industry. These qualifications are important in understanding where the LSLBC is coming from when it exercises its agency powers. While ruminations regarding the appointed nature of a Board position are best reserved for other arenas of public discourse, it is incredibly important for contractors to understand that the LSLBC consists of people with actual construction experience. These are people that “know what you’re going through,” so to speak. They have an understanding of that difficult homeowner, or that fight to get paid. With the exception of two “at-large” positions, this experience is a requirement to sit on the LSLBC, which makes the system inherently more fair.

Of course, this is a difficult concept to explain to a person or business that is being accused, by the Board, of violating one of its rules. I would suggest, though, that it is better (and financially safer) to be governed by a group of colleagues from within your profession, as opposed to a group of people who are removed from, or unrelated to, the construction industry. The LSLBC will always be an institution that exists to safeguard the construction profession. While this will sometimes manifest itself in coming down hard on members of that profession, it will likely be a fair, educated, and even-handed determination. Regardless, though, while a good approach is to know who and what you are up against, a better approach is to avoid that confrontation.

I Have a Hearing – What Now?

Of course, the hope is that you will not be called before the LSLBC for any violation. Whether you are an in-state contractor or out-of-state contractor, hopefully you have already contacted an attorney to make sure your licenses and registrations are current, relevant and secured. If you haven’t – do so! This should avoid being called before the LSLBC for any licensing violation. Sometimes, though, it cannot be avoided (for example, when a homeowner files a complaint about workmanship). Regardless of the underlying complaint, should you find yourself holding that letter demanding your appearance, you should not hesitate in contacting an attorney. For one, the procedure during an LSLBC hearing is almost entirely different from what one would normally expects at a hearing.

You will be required to enter a “plea” before the proceedings begin (sounds like criminal court). You will be entitled to review the evidence compiled against you, but this review happens on the day you show up for the hearing. You might be questioned by an attorney for the Board, or be able to ask questions of the Board’s investigator. Sometimes you might be able to have a more informal discussion of your matter with the Board itself, or they might just see all the evidence and make a determination. Sometimes, you might not even need to show up if you  offer to settle the matter, in writing, beforehand. It is, however, almost a guarantee that you will be fined with at least the administrative fee of $500.00. To se a general outcome of 2012 cases, see here.

The moral of the story: agency hearings are a different kind of animal, which is more likely to throw people for a loop. Your best bet is to prepare yourself by preparing your best case. Even though the situation is more informal than a court proceeding, the question is the same: has there been a violation of some law. Who better to help navigate that course than a lawyer with experience in that field of law?

 

 

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Posted in:     Construction News, Licensing, Louisiana, Regulations  /  Tags: , , ,   /   2 Comments

Contractors Prepare: 2013 Hurricane Season

From his vantage point high above the earth in...

(Photo credit: Wikipedia)

Last week, the Office of the Attorney General issued a general letter from Attorney General Buddy Caldwell to the public regarding the 2013 hurricane season. Sometimes, for unfortunate reasons, this time of the year and leading into the late fall and early winter can see a spike in the need for contractors and subcontractors. More unfortunate still is that when we see this spike in demand, we sometimes read or hear about the negative, and instances of “contractor fraud.” Since Buddy has taken the time to inform the public about how to handle these situations, I thought it fitting to inform contractors how they can better prepare for the 2013 hurricane season, and avoid problems in their own right.

Keepin’ It Current

Louisiana has pretty strict guidelines for determining who is allowed to bid, contract and work on a project. The foundation of all that governs contractors in this state is the license. Long story short and in general: you need one (there are always exceptions, depending on the work being done). But I’m an attorney, so I can’t keep it that short. Whether you are an out-of-state contractor or an in-state contractor, in order to operate within the law, there are certain qualifications that must be met. One such necessity is being licensed by this state before even bidding on a project. In my experience, this isn’t usually a problem when people come to us here at the Wolfe Law Group. However, knowing that this license expires is just as important as knowing that you are licensed in the first place. As we enter into a potentially busy season, take the time to review your license. Is it a one-, two- or three-year license? When was it issued? Make sure you keep it current. Your license expires on the anniversary of the date on which it was originally issued. You only have 15 days from that expiration to renew your license without paying a penalty, or worse, being treated as a new applicant.

To all you new applicants out there: now is the time to begin the process of acquiring the proper licensing or registration if you have not already done so. As I said before, any hurricane season has the potential for a spike in business. However, acquiring a license isn’t a quick turnaround. Depending on your status, it could take anywhere from 4 to 10 weeks to get your license. During a time when competition could become rather fierce, this is a delay that could potentially kill your ability to turn a profit.

More important, though, is the need to avoid penalties, losses and lawsuits in the future. The last thing you want to do is go through the entire process and expense of completing a project to then have difficulties with the homeowner and you NOT be licensed. For example, if they decide to not pay you but you don’t have your license, you almost definitely do not have any lien rights under the Private Works Act. If they decide to report you and you don’t have a license, you risk exposure to civil and potentially criminal penalties. If they decide to sue you, well, you get the point. As we enter the 2013 hurricane season, the first item on your contractor preparedness checklist should be to make sure everything is current.

Keepin’ It Active

Less “do or die,” but in my opinion important, is maintaining an active status with the Secretary of State. You would be amazed at how many times a simple search on the Secretary of State’s website reveals that a company actively doing business in this state is actually listed as inactive or that its charter has been revoked by the Secretary. Why? Because people get sloppy. It takes almost no time and very little expense to maintain an active, good standing status with the State of Louisiana, yet people so often let this fall by the wayside. While it doesn’t necessarily impact one’s ability to work or provide services in the state, it could have ramifications if you’re sued by a disgruntled homeowner.

Remember, you are running a business. In so doing, there are certain guidelines and requirements that you need to follow depending on the type of business you are operating. Stay on top of it, or better still, have your lawyer stay on top of it for you. Let’s get back to that disgruntled homeowner from above. Say, the project is complete and, for whatever reason, they sue your company. You’re safe, though, personally right? Maybe. Have you been keeping up with those state requirements for your business? Have you been filing all the correct paperwork every year? Have you been maintaining your accounts correctly? Has your business been operating as a true business, or is it just a front for either yourself or another business? If you can’t answer yes to these questions, you have a problem and you might not be protected. An easy way to avoid this is to keep it active. Make sure you are consistently keeping records with the state and you consistently keep good records for your business. Don’t let the “business-y” end of your construction business lag, especially moving into a time when you could potentially become much busier than usual. If this isn’t your thing – hire that attorney to do it for you.

Keepin’ It Honest

The final note is just one of general good business practice. Keep it honest. When you start bidding and contracting, a lot of times you can avoid future headaches by just playing the game fairly. Of course, there will always be those difficult people you will encounter along the way. It’s amazing, though, how far someone can get (and how much trouble they can avoid) by developing an honest and trusting relationship with the people they are working with. Now is as good a time as any to make that a work mantra.

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Posted in:     Construction Contracts, Hurricane, Licensing, Regulations  /  Tags: , , , ,   /   1 Comment