A Step-by-step Approach to Preventing, Obtaining a Judgment on, and Collecting on Business Debt

In my previous article on preventing debt collection issues from arising, I address how Massachusetts business owners and managers can utilize various strategies to prevent business-to-business debt problems from occurring and when they do, how a business can gather information for the purpose of understanding a vendor, contractor, or service provider and for the purpose of building evidence in the event of future litigation. Here, in this article, I examine the specific actions that a Massachusetts business owner or manager can take once a financial loss has occurred as a result of a breach of contract or other failure in a business-to-business relationship.

Obtaining a Judgment Against a Massachusetts Business

“What are My Options?”

The Breach of Contract Lawsuit

One of the best means commonly used to obtain a judgment against a business in Massachusetts is to bring the party to court on a breach of contract claim. Commonly, when one party to a contract fails in any of the following ways, the other party or parties to the contract may pursue a claim for breach of contract:

·         Failure to Pay for Goods Delivered

·         Failure to Pay for Services Rendered

·         Breach of Warranty

·         Failure to Deliver According to Contract Terms

Engaging in Contract-prohibited Activity – Violating a non-compete clause or contract, or some other contract provision.

Provided that the contract is valid, the party claiming breach of contract may be able to recover damages from the breaching party or parties. Upon the decision of a court to provide for damages to the party suffering from the breach of contract, a judgment is issued by the court. This judgment, while a victory, can be an empty victory if the party that is charged with paying the damage award refuses to pay or cannot pay.

“Wait, I Can Receive a Judgment from a Court in Massachusetts and Still Not Be Paid?”

The dirty secret that many attorneys do not want to talk about, and that experienced Massachusetts business owners realize, is that a court judgment in some cases is only as good as the paper that is written on. This potential fact leaves many Massachusetts business owners feeling that pursuing a legal claim for breach of contract, or for any other theory for that matter, is a waste of time because they may or may not be paid. So, the logic goes, after spending all this time, emotional energy, and money for lawyers, the potential of not getting paid at the end of the process makes doing nothing a better option.

While it is certainly true that sometimes there are no good options, that pursuing a lawsuit is folly, that is not always the case. A good attorney will spend time with you not only parsing out the legal options that are available to pursue but will also explain the likelihood of success or lack of success and will investigate your adversary to determine the ability to collect from that adversary.

Ideally, some of the legwork of knowing your business partner will have been done by you prior to even entering business with that company. Therefore, theoretically, you will be informed as to the assets that your business partner, service provider, vendor, contractor, etc., possesses. However, sometimes a Massachusetts business owner or manager has overlooked the vetting step, or your business partner’s assets have changed. In any case, this article points out that obtaining a judgment against a party to a contract is one thing…collecting on that judgment is another.

Please read my next article in this series which addresses what the debt collection process looks like for a Massachusetts business owner or operator.

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