You delivered the work. You sent the invoice. The payment deadline came and went. Now your client has gone silent, or worse, they’re making excuses about why they can’t pay.
If you’ve ever been in this situation, you know how frustrating it feels. You held up your end of the deal, but now you’re stuck chasing money that’s rightfully yours. The stress affects your cash flow, your business operations, and honestly, your peace of mind.
A signed contract isn’t just a piece of paper, it’s a legal commitment that gives you real options for getting paid. This guide will walk you through exactly what to do when a client stops paying, from your first response to your final options.
Why Do Clients Stop Paying?
Before you react, it helps to understand why payment stopped. The reason affects how you should respond.
Cash flow problems are the most common reason. Your client might genuinely want to pay but doesn’t have the money right now. Their own clients might not have paid them, or they’re going through a rough business patch.
Dispute about the work happens when clients aren’t satisfied with what you delivered. Maybe they expected something different, or there’s a genuine quality issue you’re not aware of.
Poor business practices mean some clients simply have terrible payment systems. Invoices get lost, approvals take forever, or their accounting department is disorganized.
Intentional non-payment is rare but real. Some bad actors sign contracts knowing they won’t pay, hoping to get free work or planning to dispute everything later.
Understanding the reason helps you choose the right approach. A client with cash flow issues needs a different solution than one who’s intentionally dodging payment.
What Should You Do Immediately?
The moment a payment is late, take these steps. Don’t wait weeks hoping it magically resolves itself.
Check your records first. Before contacting the client, verify everything on your end. Did you send the invoice to the right email? Did you meet all the deliverables mentioned in the contract? Are your payment terms clear? Make sure you’re 100% in the right before raising the issue.
Send a friendly reminder. Your first communication should be polite and assume good faith. Sometimes invoices genuinely get overlooked. Send a simple email: “Hi [Name], just wanted to check if you received our invoice dated [date] for [amount]. The payment was due on [date]. Please let me know if you need me to resend it.”
Keep this message short, professional, and non-accusatory. Many payment issues resolve at this stage because it was simply an oversight.
Document everything. From this point forward, keep records of every email, phone call, text message, and conversation about payment. Note the date, time, what was discussed, and any promises made. This documentation becomes crucial later.
Review your contract. Pull out the signed agreement and review the payment terms, late fees, interest clauses, and any provisions about disputes or collections. Know exactly what rights you have.
How Do You Handle the First Conversation?
When you reach out to discuss the late payment, approach it carefully. This conversation can either resolve everything or make the situation worse.
Choose the right communication method. Email creates a paper trail, which is good. But sometimes a phone call works better for complex situations. Video calls let you read body language. Choose based on your relationship with the client and the amount owed.
Ask questions, don’t accuse. Instead of saying “You haven’t paid,” try “I noticed the invoice is past due. Is everything okay on your end?” This opens dialogue rather than starting a fight.
Listen to their explanation. Let the client explain what’s happening. They might reveal information that changes your strategy, like they’re waiting for approval, there’s a dispute you didn’t know about, or they’re genuinely struggling financially.
Propose solutions. If they have cash flow issues, would a payment plan work? If there’s a dispute about the work, can you resolve it quickly? Being flexible often gets you paid faster than being rigid.
Set clear next steps. Don’t leave the conversation vague. Get a specific commitment: “So you’ll process the payment by Friday and send me confirmation?” Make sure you both understand what happens next.
Follow up in writing. After any verbal conversation, send an email summarizing what you discussed and what was agreed. This protects you if their story changes later.
The goal is to get paid, not to win an argument. Stay calm, stay professional, and focus on solutions.
What Is a Formal Legal Notice?
If friendly reminders don’t work, it’s time to escalate to a formal demand letter. This is a serious legal step that shows you mean business.
What Makes a Legal Notice Effective?
A demand letter or a Legal Notice for Non-Payment of dues is a written notice that formally demands payment and outlines the consequences if the client doesn’t pay. It’s more serious than a reminder email but less drastic than filing a lawsuit.
What to include in your demand letter:
- Clear statement of what’s owed: Specify the exact amount, what it’s for, and the invoice date.
- Reference to your contract: Cite the specific contract clauses about payment terms and obligations.
- Timeline of events: Briefly explain when work was delivered, when payment was due, and your attempts to resolve this.
- Specific demand: State exactly what you want, usually full payment by a specific date.
- Consequences: Explain what you’ll do if they don’t pay, legal action, collections, reporting to credit agencies, etc.
- Deadline for response: Give them a firm deadline, typically 7-14 days from receiving the letter.
The tone matters. Be firm and professional, not angry or threatening. State facts, not emotions. Don’t make threats you won’t follow through on, that weakens your credibility.
Delivery method counts. Send legal notice via registered post or courier with tracking. You need proof they received it. Email is fine as a backup, but formal delivery shows you’re serious.
What Legal Options Do You Have?
When demand letters and negotiations fail, you have several legal remedies available under Indian law.
Filing a Case in Civil Court
Filing a civil suit for breach of contract is your main option. The court can order the client to pay the full amount plus interest and legal costs.
The process: You file a written complaint, the court issues notice to the defendant, they must file a reply, and then the case goes through hearings where both sides present evidence. If you win, the court issues a decree ordering payment.
Timeline: Civil cases in India can take 2-5 years or longer, depending on the court’s backlog and case complexity. Commercial Courts established under the Commercial Courts Act, 2015 handle commercial disputes faster, often 12-18 months.
Costs: Legal fees vary but expect to spend ₹50,000-₹2 lakhs for a straightforward breach of contract case, more if it’s complex. Court fees are based on the claim amount.
When it’s worth it: Civil litigation makes sense when the amount owed is substantial, you have a clear contract and evidence, and the client has assets you can potentially recover from.
Summary Suits for Clear-Cut Cases
If you have a signed contract and clear evidence of non-payment with no legitimate dispute, you might file a summary suit under Order 37 of the Civil Procedure Code.
Summary suits skip the lengthy trial process. If the defendant can’t show a strong defense, the court grants judgment quickly, sometimes within a few months. The defendant must convince the court they have a real defense, not just excuses.
This works best when payment obligation is crystal clear and the client has no reasonable dispute about the work quality or contract terms.
Arbitration Clause in Your Contract
If your contract includes an arbitration clause, you must go through arbitration instead of court. This is often faster and more flexible than litigation.
The Arbitration and Conciliation Act governs this process. You appoint an arbitrator (or a panel), present your case, and the arbitrator issues an award. Arbitration typically costs less than court and concludes within 6-12 months.
The award can be enforced like a court decree. If your contract has arbitration provisions, follow them, trying to go straight to court might get your case dismissed.
How Do You Actually Get the Money?
Winning a court judgment is only half the battle. You still need to actually collect the money.
Execution Proceedings
After getting a favorable court decree, if the client still won’t pay, you file execution proceedings. The court can then:
Attach bank accounts: The court orders the client’s bank to freeze accounts and transfer money to you.
Seize assets: Court officers can seize the client’s movable property (vehicles, equipment, inventory) and sell it to pay you.
Attach property: The court can attach immovable property like land or buildings, preventing sale until your decree is satisfied.
Garnish receivables: If the client has money owed to them by others, the court can redirect that money to you.
Execution proceedings require more legal fees and time, but they give you real enforcement power.
Insolvency Proceedings
If your client owes you at least ₹1 lakh (₹10 lakhs for corporate debtors), you can initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
This is serious, it can force the company into liquidation. The threat alone often motivates payment. However, if the company truly has no money, insolvency proceedings might not recover much.
Use this option when you’re dealing with a business debtor who has assets but refuses to pay despite having the ability.
How Can You Prevent This in the Future?
The best payment problem is the one that never happens. Build these protections into your business practices.
Strengthen Your Contracts
Clear payment terms: Specify exact amounts, payment schedules, and methods. Don’t leave anything vague.
Milestone payments: For larger projects, structure payments at specific milestones. Don’t do all the work before getting paid.
Late payment penalties: Include interest on overdue payments (8-18% annually is common in India). This motivates timely payment.
Retainer or deposit: Get 20-50% upfront before starting work. This ensures the client is serious and gives you some security.
Kill fee clause: If the client cancels mid-project, specify what you’re paid for work already completed.
Attorney fee clause: State that if you need to pursue legal action for non-payment, the client pays your legal costs. Courts often enforce these clauses for the winning party.
Due Diligence on New Clients
Before taking on new clients, do basic research:
- Check their business reputation and reviews
- Ask for references from other vendors
- Search for any legal cases or payment disputes
- For large projects, check their financial stability
- Start with smaller projects before committing to large contracts
Trust your instincts. If a client seems sketchy during negotiations, they’ll probably be worse when it’s time to pay.
Better Invoicing Practices
Invoice immediately: Don’t wait to send invoices. Send them as soon as work is completed or milestones are met.
Make them clear: Itemize everything, reference the contract and specific deliverables, include payment terms and deadlines prominently.
Follow up proactively: Send a reminder a few days before payment is due, not after it’s late.
Make payment easy: Offer multiple payment methods, bank transfer, online payment, UPI, credit cards. Remove friction from the payment process.
Maintain Good Client Communication
Most payment issues come from miscommunication. Keep clients updated on project progress, confirm deliverables meet expectations before invoicing, and address concerns immediately before they turn into payment disputes.
When clients feel informed and satisfied, they pay on time.
Frequently Asked Questions About Non-Payment Issues
What should I do if a client refuses to pay after completing work?
First, verify that you fulfilled all contract obligations and sent proper invoices. Send a polite payment reminder via email, asking if they received the invoice and if there are any issues. If they don’t respond within 3-5 days, escalate to a phone call to understand why payment is delayed. Document all communications. If the client continues refusing payment, send a formal demand letter giving them 7-14 days to pay before you pursue legal action. Keep records of all deliverables, communications, and the signed contract. If the amount is substantial and the client still won’t pay, consult a lawyer about filing a breach of contract case. The key is escalating gradually while maintaining professionalism and documentation.
How long do I have to file a case for non-payment in India?
Under the Limitation Act, 1963, you generally have three years from the date the payment became due to file a civil suit for breach of contract. For contracts specifying payment on demand, the three-year period starts when you first demanded payment. If the contract specifies a payment date, the limitation period starts from that date. This deadline is strict, if you file after three years, the court will likely dismiss your case as time-barred. However, if the client acknowledges the debt in writing or makes a partial payment, the limitation period can restart from that date. For this reason, always try to get written acknowledgment of the debt during negotiations, as it extends your window to file legal action if needed.
Can I stop work if a client doesn’t pay an installment?
Yes, if your contract includes payment milestones and a client misses an installment, you generally have the right to suspend work until payment is received. However, this depends on your specific contract terms. Check if your contract includes a clause allowing suspension for non-payment. If it does, formally notify the client in writing that you’re suspending work due to non-payment and will resume once you receive the outstanding amount. If your contract doesn’t explicitly allow this, stopping work could put you in breach of contract. For future contracts, always include a clause stating that your obligation to continue work is conditional on receiving scheduled payments. This gives you clear contractual right to pause work when payments are late.
What is the success rate of sending a legal notice for payment recovery?
Legal notices sent by lawyers have approximately 40-60% success rate in recovering payments without going to court. The success rate is higher when the amount owed is clear and undisputed, you have a solid written contract, the client is an established business with reputation to protect, and the letter comes from a credible law firm. Success rates drop when the client is financially insolvent, there are genuine disputes about work quality, the client is a fly-by-night operation, or the amount is very small relative to legal costs. Even when legal notices don’t result in full immediate payment, they often open negotiations for payment plans or settlements. The mere presence of legal letterhead makes many clients take the matter seriously, knowing you’re willing to invest in recovery.
Can I claim interest on delayed payments?
Yes, you can claim interest on delayed payments if your contract includes an interest clause specifying the rate. Common rates in Indian commercial contracts range from 8-18% per annum. If your contract is silent on interest, you can still claim interest under Section 34 of the Civil Procedure Code, which allows courts to award interest from the date of filing suit until payment. Additionally, the Interest Act, 1978 allows interest at the current rate (usually 10-12% annually). The MSME Act provides special protection for micro, small, and medium enterprises, if your client is a larger company and you’re an MSME, you can claim compound interest at three times the bank rate (typically 21-24% annually) for delayed payments beyond 45 days. Always include an interest clause in contracts to maximize your recovery and motivate timely payment.
What evidence do I need to prove non-payment in court?
Strong evidence for non-payment cases includes: (1) The signed contract clearly showing payment terms, amounts, and deadlines. (2) Proof of work completion, deliverables, acceptance emails, client approval, project files, or completion certificates. (3) Invoices with proper dates, amounts, and payment terms clearly stated. (4) Communication records, all emails, messages, letters discussing the project, deliverables, and payment. (5) Demand letters and payment reminders showing you requested payment. (6) Bank statements showing no payment was received. (7) Any written acknowledgment of the debt from the client. Organize everything chronologically with a cover memo explaining the timeline. Courts prefer documentary evidence over oral testimony. Digital evidence like emails and messages are admissible if properly authenticated. Keep originals of signed documents, as courts may require them. The clearer and more organized your evidence, the stronger your case.
About My Legal Pal
My Legal Pal helps businesses and freelancers navigate payment disputes and contract enforcement. For personalized guidance on recovering unpaid invoices or strengthening your contracts, consult with a qualified contract attorney who understands your specific situation and can recommend the most effective strategy. Contact us if you require to send legal notice in Mumbai, Bangalore, Hyderabad, Lucknow, or any other city
