Contractor didn't get his contract in writing. Now customer doesn't want to pay what is owed. Ouch!

QUESTION.
I have recently started a construction consulting business and am having difficulty collecting payment from a client. We do not have a written contract but did verbally agree to terms prior to my engagement. He has paid a portion of December's billing and originally agreed to pay me in full for my services by the end of January. However, he has since renegged in our agreement and now states that he will not pay what is owed but will settle for a fraction of the amount.
Please advise of my options at this point. Note that there are additional business owners who witnessed the verbal agreements mentioned above. Thank you in advance for your assistance.

ANSWER.
Your question is legal in nature and generally SCORE counselors are not supposed to answer legal questions. Instead we are supposed to refer you to an attorney to get an answer. Of course, I cross the line from time to time if the answer is fairly easy to provide. The general rule is that a contract for more than $500 of product or services is required to be in writing to be enforceable. Sounds like your client knew the law and took advantage of your ignorance. However, you can sue him for unjust enrichment which is a way to sue for what you are owed "off the contract." If you bring your witnesses to court, I suspect the judge will award you pretty much what you listed on the written contract that the client did not sign. You probably should chaulk this fiasco up as a learning experience. Never do more than $500 of work without first getting a signed written contract. Also, never let the client get ahead of you. If you do work on installments, then only do work that you have already been paid for. Then when a client refuses to make more payments, you just quit working for her. That way you only work for compensation! If your client paid a bill which includes many, most or all the terms of your contract, then that payment can be used as written evidence of a contact that existed. You do not specifically need a formal written contract on which to sue. Does this client care about his reputation in the local business community? His failure to pay you what you are owed can cause him to damage his reputation. You can tell whoever you like what he did to you (as long as it does not appear to be done maliciously). And over time his reputation will go down. Of course, that assumes you have a good reputation yourself. I hope my comments are helpful to you. Good luck! Regards, -Jeff

Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com