
Ask HN: Client won't pay me my invoice and disputed Paypal payment 3 months ago - spoiledtechie
I have been working with a client now for 6 months.  He has paid me around 3k each month.  While my invoices were well above the prescribed amount.  He chose to do that saying that we would add it to equity later.  Sweat equity.  Just a week ago, we had a falling out and closing up my work, I sent him an invoice for 17k.  After which things got worse.  He has attacked me, my family and called me names.  He is trying to intimidate me.  He also took the stance that he doesn&#x27;t want to speak to me anymore.  After which, I did threaten to share the details of this with his client base and all his buyers.  He wasn&#x27;t happy with that.  I did not do so, but now he is unwilling to talk.<p>After him shutting down communication, I reached out to his investors, which got him talking again.<p>He has since said he is only willing to pay me $3500 on my invoice.  Second, he disputed 3k he paid me in March, so I now owe 3k towards Paypal because of the dispute.<p>He has also done this to other contractors, which I can count as 5 for now.  I have 2 others willing to follow through with legal action.  I guess I am wondering what has your experience been and is it worth it?  Is it worth the time in court for just 17k?  Will the lawyer I speak to even look at a contract dispute that low?<p>Can I also be sued for threatening him with reaching out to his customer base and buyers.<p>I didn&#x27;t take the 3500, as I would like to see at least 9k.  But he isn&#x27;t willing to reach to that.<p>Help and any advise would be wonderful!
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Blackstone4
This is a complicated multi-facetted issue so I'm only going to comment on one
aspect of it. Your attitude and mental health.

Just think carefully about each avenue you want to take and how that will
impact your well-being and productivity.

There's an opportunity cost to chasing the money. In the time spent chasing
it, you could instead be earning it back doing other work and be happier for
it. Then it may be worth considering. I don't have a full picture of your
earning potential and financial situation so I can't comment either way here.

Anecdotally, I was over billed by my electricity suppliers by ~£50. I could
have let it go but I chased it and spent hours on the phone and writing emails
to them. I filed complaints and threatened to go the regulator. It made me
very angry and I could have spent that time far more productively and earned
£50 doing something else. So with hindsight, I would do things differently.

I know my example is small compared to yours but useful none the less.

~~~
subhobroto
Fantastic input.

That said, this would be a good learning experience as they don't teach "How
to be a free lancer" in college.

I shared my thoughts here and would like to hear what you think (besides the
awful formatting)

[https://news.ycombinator.com/item?id=17148628](https://news.ycombinator.com/item?id=17148628)

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Someone1234
Honestly nothing about that seems very professional from either side. You
called him names, he called you names, and everyone's feelings got hurt. That
sounds like one of those "friendship" business arrangements.

Agreeing to equity might muddy the waters. Equity is worthless, but by
agreeing to it in lieu of a fixed amount, you've set a value. So you likely
aren't getting 17K but may get the equity you agreed to in writing (assuming
you haven't already).

Hopefully your invoices contained a due date, and your contract a clause
allowing interest or penalty on late payment. If he is passed due, continue to
send him notices but do them via tracked postage (and include interest if
applicable).

If you plan to sue, which it sounds like you'll need to, start getting
everything in writing. No more phone calls at all.

If he ignores your late notices get a lawyer to write a letter giving him a
final settlement amount before the suit is filed, and then have them file if
he ignores it.

A layer will take this, but expect them to take the lion's share. It still
might make financial sense, even based on the settlement figures you yourself
suggested in the OP.

By the way:

> After him shutting down communication, I reached out to his investors, which
> got him talking again.

I'd make sure to honestly tell the lawyer exactly what you said to his
investors, a countersuit for defamation could ruin the case (make it cost-not-
viable).

~~~
spoiledtechie
Thank you. I agree. It is not professional. I didn't call him names, but I
would say feelings got hurt.

Equity won't happen now.

There was no contract. It was verbal mainly.

Thank you for the final settlement amount. I appreciate that advice!

I don't really care about the money now, rather the principle that he can't
renegotiate invoices when he feels like it. His integrity is lost.

Defamation for what? For speaking to his investors? I sent them notice that I
was informing them. I didn't want to threaten them. But I guess by notifying
his customer base and buyers, it could be seen as that?

Cost-not-viable. Appreciate you lining that up!

~~~
where_do_i_live
If you don't have a written contract, and everything was verbal - you don't
have a chance whatsoever to sue and come out victorious.

It sounds like unless you can pressure the individuals involved, a judge will
be a sore disappointment. Feel free to talk to a lawyer, but no lawyer will
take this case unless you pay them upfront and they will likely tell you that
you are going to lose this and its not worth your time/money.

~~~
xstartup
Nothing having a contract does not mean everything is lost. Many people are
giving this advise, "oh but you don't have a contract".

Even if you don't have a contract It does not mean someone can keep your
money.

As long as you can prove it's your money which is unlawfully kept hostage, you
can sue.

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htimspierce
Hey there,

While I can't offer any legal advice (I would recommend not trying to sue this
person, especially if they have more resources than you do - they'll just
counter-use you to such a degree it won't be worth it).

I'm working on a project over here that is aimed to help freelancers avoid
situations like these: www.knowtheypay.com.

You are exactly the sort of person I'm hoping to help in the future -
unfortunately, I've found that the best method for dealing with clients like
these is avoiding them at all costs.

Again, I'm really sorry this happened to you. Wish I could send you a beer (or
coffee) via HN!

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2trill2spill
Go get a free consultation from some lawyers and see what they have to say. I
personal would sue If you don't mind burning that bridge for good. But I think
no matter what you do talk to some lawyers.

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mcv
I once had a client refuse to pay €600. That amount is just not worth going to
court over. Suck it up and move on.

But $17k? That definitely sounds like court material. Talk to a lawyer. Did
you keep all of your invoices and your communication about this?

One thing that might work against you is that you continued working for him
after he underpaid your invoices. When a client refuses to pay, quit. If they
promise to compensate in other ways that are acceptable to you, make sure you
get it in contract.

Most of all, though: talk to a lawyer.

~~~
londons_explore
It depends on the country.

In the UK, a small claims court will happily take on such small amounts, with
no lawyers involved. It usually won't take up more than a few hours of your
time, especially if you've done the process before.

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saluki
You might be able to win your paypal dispute if there are emails from him
indicating to you that he had made that payment amount. Upload all the emails
relating to that payment from him. You could include one that shows he's
making threats against you around the time he filed the dispute.

I had a client's wife dispute a payment through paypal because she didn't
recognize the charge. I uploaded an email from him indicating he had sent me
the paypal payment and they dismissed the dispute without input from him. (he
said he'd just send me another payment if they reversed it)

I would offer to accept him cancelling the paypal dispute and take the $3500
(or even a lesser amount) and move on.

In the future don't keep working for clients if they aren't paying the full
amount of your invoices and invoice them frequently so they don't owe you too
much at one time.

If they are getting slow to pay you can get slow to provide services.
Sometimes companies need time to get their cash flow caught up so that's
understandable. But try to minimize the time/money you extend during those
times.

Good luck. (Move On)

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Blackstone4
In a fight the person who steps up and says "I'm going to f*k you up no matter
what it costs me", is crazy and will make the other person re-think whether or
not they want to confront this person. They may think about running away.

It sounds like your client is trying this with you. He's told you that he's
crazy and willing to go the distance. So the question you have to ask
yourself, is are you willing to signal that you are willing to go the distance
no matter what? or do you want to go home?

I used the word "signal" very deliberately. You may only need to signal for a
time and back it up with some actions (hopefully that require minimal time and
money). Then he may change his mind and choose to pay you because you're crazy
and just wants to get rid of you.

~~~
Blackstone4
So how would you signal that you're willing to go the distance? I would tell
him "I'm coming for that $17k even if it costs me more that $17k. I'm coming
for your clients and your business. I'm start speaking to other contracts and
we are going to bring a class action against you.

We're going to see if your clients have been impacted by your business
practise and see if they want to join the lawsuit. Our lawyers will be in with
your clients and employees...blablabla"

Tell what you are going to do next then do it. Hold a little back at every
stage i.e. don't tell him just yet that you've spoken to other contracts. Keep
that up your sleeve for later.

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Fortative
There are often such problems with contract work. My attorney explained to me
that if the developer does not sign over the rights of the code developed it
could be subject to license fees. If you seek an attorney for this they will
say something like pay this invoice or pay a license fee for the code. Once
they pay, you will need to sign over all rights to the code. There are
attorneys that work with developers on these type of subjects as everyone I
know has issues on both sides of contract work.

------
mafm
I'd suggest putting it down as a learning experience and moving on. People
will rip you off from time to time. Unless you have a good chance at a quick,
profitable, resolution I'd suggest getting on with your life.

I've been ripped off for amounts in the tens of thousands of dollars on 3
occasions. I was pretty angry each time, but the only time I pursued it (and
got my money) was the case where the counter-party was a large firm with
plenty of sensible lawyers. Trying to get money back from individuals or small
organisations where people have hurt feelings is an enormous hassle.

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is_true
You developed all the SW? You have access to the clients? Can you replicate
the business?

Also. PayPal is not a company to trust when you are on the receiving end at
least. Learnt that the hard way.

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greenyoda
> _" Can I also be sued for threatening him with reaching out to his customer
> base and buyers."_

Since you didn't actually talk to his customers or buyers, I don't think there
would be any damages that he could sue you for.

However, threatening to harm someone if they don't pay you sounds like it
could be extortion, so if he has proof that you did that (like an e-mail), he
might be able to press criminal charges against you.

You really need to talk to a lawyer.

~~~
spoiledtechie
Harm? Physically? I did not do so. He was threatening me...

I will go see a lawyer. Thank you.

~~~
mcv
If he threatened you physically, you might want to inform the police.

~~~
greenyoda
Involving the police could end up being a very costly decision if he also
committed a crime. That's why he really needs to see a lawyer before he talks
to this guy again or makes any more public statements about what happened.
(The comments he made here admitting to threatening the non-payer's business
interests can be connected to his real identity through all the information in
his profile. All you'd need is a subpoena for domain registration or ISP
records.)

A lawyer, if given _all_ the above information, would be able to tell him
whether it would be better for him to fight or just walk away (and also give
him advice on how to better handle this kind of situation in the future).

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ApolloRising
This is why lawyers work on a retainer. I would adopt a similar practice in
the future. It has always eliminated the troublesome clients.

You can get a lawyer and send a letter to him and the investors if your lawyer
advises.

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jiveturkey
completely wrong place to ask. just hire a lawyer. for $500 - $1500 you can
get 2 actually valid and actually useful legal opinions.

if you just wanted to vent and hear some jabber until you get answers that
confirm your inner thoughts, ok then you’ve come to the right place.

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subhobroto
IANAL and this is not legal advice. This is an opinion and if you are really
serious about this, you should really be talking to an attorney, an IRS
Enrolled Agent AND a collection agency instead of a bunch of people who know
more about software than what a Civil Code is.

First, SORRY to see this happen to you, but in my two decades of dealings,
this is nothing new, infact pretty mild, so if I were you, I would chalk this
up as a learning experience.

Here are my thoughts:

1\. Stop extending credit to your clients.

    
    
      You are in the software business. What were you doing extending a NET30 to your customers? Sign up with a invoice agency and let them do what they do best and you focus on what you do best.
      Hate paying 5% of your receivables as fees? How does it feel paying 150% of your receivables as fees now?
    

2\. f#k Paypal.

    
    
      I only use Paypal to pay when Chase Freedom gives me 5% cashback for using Paypal or Paypal sends me a coupon because I have not used them in a while. I NEVER receive money over Paypal unless it's a really close friend.
      Karma just got you buddy for supporting a f#ked up company that tries to be a bank but is not competent enough to be one. Stop using Paypal unless you use it to loan money to friends you won't mind never recovering from.
      f#k Paypal.
    

3\. You will not do business with this client ever.

    
    
      You will, while working with an attorney AND a collection agency be advised to report the delinquent amount over to all the credit reporting agencies.
      You will also have to notify the IRS for not only your lost income but also their income (the amount they did not pay you).
      They owe the IRS taxes on the "discount".
    

4\. > I have 2 others willing to follow through with legal action

    
    
      That's bullsh*t.
    
      They have done nothing so far and will do nothing. It's all just hot air. I have been screwed over so many times by clients and their "ex" consultants who wanted to "follow through with legal action".
      Those "ex" consultants became "current" consultants as soon as they got paid.
      Don't want to trust a stranger on the internet? Good, you're learning fast. Also, Try this: "Hey pissed off ex consultants. I have this fascinating lawyer that will represent us for $2000/pop. Flat fee, great deal. When do you guys wire me the $1000 upfront and $1000 after our initial meeting?".
      Tell us how this goes.
    

5\. > Can I also be sued for threatening him with reaching out to his customer
base and buyers.

    
    
      You can be sued for farting in my general direction.
    
      Will the judge throw the case out? Depends on what you have.
      Will the judge hold you in contempt if you continued to stay and argued there is merit? Report back and let us know.
    

6\. > I didn't take the 3500, as I would like to see at least 9k. But he isn't
willing to reach to that.

    
    
      That's not how it works if you have a half decent contract.
    
      A half decent contract will mention that any amounts paid will apply to the balance on the account but will not be considered a full and final payment unless the terms of the contract are adhered to.
    
      You have this in your contract, don't you?
    

So the three questions are:

A. What the hell was your billing rate? I charge $350/hr in general. All these
tirekicking f#kers say Thank you and get the hell out of my way. They go and
target the poor clueless souls that charge $50/hr (aka those who have no clue
about the overhead of running a sustainable business)

    
    
      My clients are happy to pay me this rate because they know I work with clients who let me live a happy, sustainable life allowing me to focus on high quality work instead of bullshit. They want their business to run smoothly and unless I deliver, that won't happen.
    

B. Was this a "startup" thing? In that case, Sweat equity only applies to
founders. It only rarely works for anyone else unless the company becomes mega
successful. If you want to learn how to gamble, do it right and learn about
Slicing Pie models. No? They wont follow a Slicing Pie model? OK, then they
need to pay cash. Now. Today

C. What's your and your "client's" jurisdiction? How much of your gross income
does this "client" account for?

PS: ANY attorney will represent you if you have a case and pay them money.

In my experience, you will get back your $10k back and more if you create a
VLOG of this from start to finish than you will from your "client". Just make
sure to call them, say, "GongBanger" instead of their real name in your vlogs.
Sign me up.

~~~
jackgolding
Great response - since OP has no written contract seems like they are stuffed
though?

~~~
xstartup
No, if it's your money - not having a contract does not matter.

Imagine if a thief robbed your store, not having a contract with thief does
not stop you from recovering theft amount from the thief.

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probinso
sounds like a perfect opportunity to release some open source software

