January. The month for returning gifts and purchases for refunds. “It’s not what I wanted”; “It doesn’t work”; etc etc.
But what if a business client you completed work for suddenly appears out of the woodwork demanding a refund for the work you completed some time ago?
Here’s the top things to look out for if it happens.
- Timing.
When did you complete the work and when has the client contacted you to say they’re not happy and want a refund (or more)?
Under the Limitation Act 1980 there is a limitation period of 6 years to bring a claim for breach of contract; which if your client is saying they are not happy with the work they are essentially pointing a finger at you and sneering “contract breacher! Contract breacher!”
But 6 years is the long-stop; you might have a clause in your contract that shortens this period: a time-bar.
If you have that there are 2 things to consider:
(1) is your time-bar reasonable?
(2) assuming it is, has that time expired by the time your client contacts you to say they’re not content with the work?
If you do not have a time-bar clause in your contract, the statutory 6 years applies. Is your client’s claim in time?
2. Acceptance.
You completed the work but did your client accept it?
Pick up that contract again and check if you have an acceptance clause and what does it say. If all the criteria for acceptance have been met (this could be communication from the client that they accept or the passing of a stipulated time period in which they do not raise any objections), you’re in a good position to argue that the client has indeed accepted the completed work already.
However, acceptance is a stamp of approval at a point in time. It can be used to trigger payment and to prevent later rejection under contract but it does not completely extinguish rights to claim for damages or refunds if there is a proven breach or latent damage that simply couldn’t be known at the time of acceptance.
3 Warranties.
Does your contract include warranties that the work will be fit for purpose or conform to a specification?
If so, your client may still be able to claim for breach of contract provided they make this claim before any specified warranty period expires or the limitation period runs out (back to point 1).
4. Implied Terms.
Ever wonder why lawyers write into your contracts that implied terms are excluded?
Without those magic words your client could try to bring a claim for breach of implied terms such as reasonable care and skill or fitness for purpose (even if you didn’t have express warranties set out for those).
5. The facts.
There are of course the practical things to consider too.
If your client has been using what you provided to them with no complaints for quite some time and/or they’ve combined it with their own work or that of a third party, their claim to a refund or damages because of some defect in your work is weakened.
For those of you fortunate enough to have not had the delayed refund or more demand, we would suggest you check your contracts contain the following protections just in case it does one day happen.
Check your contracts for:
- clear and reasonable time limit to bring a claim;
- clear acceptance procedure;
- limited warranty period;
- exclusion if implied terms.
If you would like some expert advice to ensure that your contracts fully protect you in the event of a claim from a client, please get in touch, we’d be happy to review your existing contracts and highlight any gaps that could make you vulnerable.
Kay graduated with a law degree from Southampton University and has over ten years experience practising commercial law in-house.
