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How do I get paid what I’m owed?
Jas Purewal is a games lawyer at Osborne Clarke and writer of Gamer/Law. This is the fourth of a series of guest posts answering your questions about games development and the law. Got a question for Jas? Ask him!
Q: I’m owed money by a former supplier/developer/publisher/other who won’t pay me. What can I do?
A: follow this process:
- Review the contract: is it clear that you are entitled to the money? Could there be any legitimate argument over whether it is due? It’s worth taking a dispassionate view at this, so you can understand your strengths and your weaknesses.
- If you DON’T have a contract with the debtor, it is going to be very hard to get paid frankly – the evidential burden is very much against you and this makes it easier for the debtor to stonewall. Sometimes there are options you can still pursue, so it’s still worth talking to a lawyer about it, but be realistic. No contract, little chance of getting paid.
- Consider making the debtor an offer - you can do this at any time of course, so technically this step doesn’t fit within the chronology, but it’s worth thinking and rethinking about as you go through your options. Even if your legal rights are as clear as day, if in practice it’s going to be a slog to get paid, or if there’s any uncertainty at all, then offering a certain amount of discount to the debtor could help secure a deal. Assuming that doesn’t work…
- Write a formal demand letter to the debtor (the person who owes you money). Write to them as if they were a stranger: explain what the contract is, give them a copy, explain what you did, what you were entitled to be paid, and that they have refused to pay. Annexe to the letter a copy of the agreement and any correspondence that might help (e.g. where they previously agreed to pay). Give them a reasonable time period to pay up (usually 14-21 days). Claim for interest to date and give them an interest calculation. You might be able to claim interest under a default interest clause if one exists in your agreement (and it should), or if you don’t have such a clause, you might be able to claim statutory interest under local law. For example, in England you can in theory ask a court to give you interest on unpaid debts at a rate of 8% over Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998 (8% over base is pretty damn good – very seldom will a court actually give it to you, but that shouldn’t stop you claiming it against the debtor).
- If payment isn’t received in that timeframe, consider what quick payment options you have under local law. For example, in England you can issue what’s called a statutory demand - a formal demand for repayment which, if not met within 21 days, entitles you to present a winding up petition against a debtor company or a bankruptcy petition against an individual. In other words, you can apply to bankrupt the debtor unless they pay you – which at the very least makes them sit up and pay attention to you (and, if they’re a company, likely will make them breach all their financing and trade contracts). It’s a VERY powerful weapon therefore – but must be used carefully. It can only be used where the debt is straightforward and can’t genuinely be contested (if it can, you can’t really use it). It’s a quick and cheap way to pile pressure on the debtor – but still worth talking to a lawyer about first before you take the plunge. If the other side gets a lawyer involved, you should definitely take advice before you stat demand them.
- If you can’t use a quick payment route, then ultimately you’ll need to commence proceedings in court. Most countries have specific court procedures for small debts which should speed up the process for small debts. Larger debts require more standard/lengthier processes to be followed. But court proceedings always involve financial and time costs, so you need to think carefully before you go ahead. The unfortunate reality is that, if court proceedings are your only route forward, most people give up at that stage and write the debt off.
- Review your other contracts and ensure they’d protect you if you go unpaid on them too.
- Read my continuing 20 Contract Questions series of posts on Gamer/Law to help better understand your contracts. Ideally, you want contracts that give you better practical protections to stop debts being run up – for example, keeping ownership of IP until you’re paid, tying work to milestones intelligentlyor even obtaining security from your contracting partner.