Disputed Invoice Clause: Everything You Need to Know
A disputed invoice clause is a conflict that occurs when the substance of the invoice clause of a contract is not agreed upon by the parties involved.3 min read
2. Invoicing Basics: Billing
3. Invoicing Basics: Payment Duration
4. Invoicing Basics: Disputing Invoices
5. Invoicing Basics: The Right to Suspend
Updated November 5, 2020:
Disputed Invoice Clause Overview
A disputed invoice clause is a conflict that occurs in business when the substance of the invoice clause of a contract is not agreed upon by the parties involved in the contract. This will usually occur when an invoice–or bill for services–is presented to a client from an independent contractor and the client does not agree to some or all of the substance of the invoice. Then, a potentially time-consuming and unpleasant dispute over billing could take place, which could even require legal resolution, in some cases. Drafting a strong and easily understood invoice clause in your contract will help you avoid this sort of dispute.
Invoicing Basics: Billing
Invoicing, or billing, is an essential action for any independent contractor. If you do not get paid for your work, you will not be able to maintain your business, and unfortunately, you may encounter clients that are unwilling to pay. The following are some best practices that may help increase the likelihood of getting paid on time and avoiding costly or time-consuming disputes over pay:
- Invoicing should occur no less than once a month.
- If your project involves providing a series of deliverables in less time than a month, an invoice should be provided with each deliverable.
- In either case, invoicing should be done on your terms.
- Whenever you plan on invoicing should be stated in the invoice clause of your contract.
- If your normal date of invoicing occurs on a weekend or holiday, you may want to include language in the invoice clause to the effect that invoicing will occur on the last business day before your normal date of invoicing.
- In the invoice clause of a contract, it is best to use the term “calendar days” instead of “days” or “business days,” as this will eliminate ambiguity (since business days for some people are not business days for others, like Columbus Day).
Invoicing Basics: Payment Duration
When you choose to bill is also important to consider. Some tips on how you may want to approach this are as follows:
- The time period between the receipt of the invoice and the payment date should be as short as it can be.
- If possible, the payment should be due before the next invoice, thereby avoiding a series of unpaid invoices.
- The consequences of late payment should be defined in the invoice clause so as to encourage your clients to pay on time. A flat fee plus an interest provision is one possibility.
Invoicing Basics: Disputing Invoices
It may be possible to resolve billing disputes before they turn into official legal matters. To provide an avenue for this, you can include a section on an invoice for the customer to voice any complaints they have with the bill. Such a practice is good customer service, although you will want to limit the time period in which a customer may dispute a bill. For instance, you could state that the client has ten days to voice any objections to the bill. If not, then it will be assumed they are in agreement with it.
If, on the other hand, a portion of the invoice is disputed, it should be insisted that the undisputed portion of the invoice be paid promptly, regardless of the state of the disputed portion. Then, once the disputed portion is resolved, such payment as is due from it should also be paid promptly.
Invoicing Basics: The Right to Suspend
In the terms of the invoice clause, you should be sure that you retain what is called the right to suspend, or the right to halt work if payment is not received on time, as well as to be compensated for any expenses related to the disruption. This is another means by which you can dissuade parties from being late on their bills, but it is only useful if you are willing to make use of it.
Often, contractors are reluctant to use the right to suspend for fear of legal action from their clients as a result of damages incurred due to the halt of work. This can be avoided, however, if a clause is inserted in the contract stating the client will hold the contractor harmless for any damages resulting from the use of their right to suspend.
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