Refusing to pay an invoice is generally considered a breach of contract if the services or goods were delivered as agreed. While you can contest an invoice due to errors, disputes over quality, or unfulfilled terms, simply refusing payment can lead to legal action, debt collection, and damage to your credit.
Can a Client Get Sued for Not Paying an Invoice? Yes, if a client refuses to pay, you have the right to take legal action. Failing to pay could result in a court judgment, interest charges, and even damage to their credit rating. It's always best to take action quickly to avoid a lengthy dispute.
Payment - obligations
Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service. You can use a statutory demand to formally request payment of what you're owed.
Every unpaid invoice is a direct threat to cash flow and business stability. A polite reminder may work once, but persistent non-payment inevitably becomes a legal problem.
When a customer refuses to pay after a final notice, document all communications and review the contract terms. Consider sending a formal demand letter outlining the amount due and payment deadline. If unpaid, businesses may pursue small claims court or mediation depending on the invoice value and jurisdiction.
Filing a Lawsuit for Breach of Contract
If your client agreed to pay for goods or services and failed to follow through, they may be in breach of contract. You have the right to sue for the amount owed, and possibly additional damages, depending on your contract and the impact of the missed payment.
Once both sides agree to an invoice, it then becomes a legal debt and an agreement. The customer is not bound to pay the invoice until the vendor has satisfied all elements of the invoice. In most cases, the customer will outline their terms of the transaction on a purchase order.
Take legal action for nonpayment of invoices
If working with collections did not work, and unpaid invoices are still lingering, it is time to seek legal action. You have the choice between small claims court or civil court. Small claims court is less time, money, and is quick to resolve your issue within the same day.
An invoice is not a legally binding agreement—but it does serve as a record of a transaction. It's evidence a product was delivered or a service was rendered and an amount is due in return.
Payment terms specify when businesses must pay for goods or services, usually after receiving an invoice. If payment is overdue, suppliers may charge interest and claim legal compensation.
Nonpayment is a significant source of contract disputes. Whether a client refuses to pay a final invoice or a customer never submits their first deposit, failure to make payments according to the agreement is a breach.
When will you get paid? Unless you've agreed on a different payment date, your customer has 30 days to pay the invoice, from the date it was issued or when they received the goods or services.
What happens if a client doesn't pay – what are your options?
What to do if a customer doesn't pay
How to Reject an Invoice?
False invoicing may also be considered invoice fraud. This occurs when a business sends an invoice to a customer to pay for goods or services that the business is aware that the customer did not purchase.
Do invoices hold up in court? No, an invoice will not usually hold up in court. An invoice is simply a request for payment, but it's not a legal document and therefore not legally binding. You may be able to legally enforce an invoice if you also have a valid contract.
The claim notice informs the debtor that if they fail to respond to it and fail to pay the debt then the creditor (you) is free to apply to the court for a judgment against them.
How to Collect Payment from Clients That Aren't Paying
It is, in effect a statute of limitations that applies to the payment of invoices and how long a creditor can chase a debtor for non-payment of an invoice. It might surprise many companies that unpaid invoices, under a simple contract, can be legitimately chased for up to 6 years.
7 tips to collect unpaid invoices from customers
If you are GST-registered or planning to apply, you may opt to start using InvoiceNow to transmit your invoice data. If you are a newly incorporated company (i.e. incorporated on or after 1 May 2025) voluntarily registering for GST, you will be required to use InvoiceNow.
Use a debt collection agency
If you can't recover the debt after friendly reminders, informal negotiations and a letter of demand, you might decide to engage a debt collection service. Let your customer know that you plan to use a debt collector. This may prompt them to pay the debt first.