Part 6: There are Disputes and There are Disputes.
Most credit people have heard all the stories. The customer who doesn’t want to pay because they didn’t get the shipment. Or it wasn’t the right product. Or it was the wrong size. Or it wasn’t delivered in time. Or it didn’t sell. Or it was broken. There are some stories about customers who assert all of these defenses, and more! Then there are disputes about the equipment that didn’t perform like it was supposed to. Or broke and the manufacturer could never get it right. Or the damage it caused when it leaked.
Some disputes are more suspect than others. On the other hand, some seemingly lame disputes might just get a Court’s attention. “The product was delivered a week late” might not seem so important, but if the delivery was drinking water for a two-week cruise, it might, especially if the debtor had to purchase replacement product, on an emergency basis, at a higher price. That could lead to a set-off or counterclaim.
The analysis of the disputes needs to be a cooperative effort among the client, the agency and the lawyer. The client knows the customer, the product and the client’s own processes. The agency has experience in the industry and, probably, with the client. The lawyer most likely has a greater understanding of the law and how it will treat the dispute. The lawyer will also have the best appreciation for the local flavor of the judges and juries and how they might deal with the debtor and its defense.
All of this information together will form a backdrop for decisions about payment arrangements, settlement terms, and lawsuits.
Sometimes the debtor files a counterclaim or countersuit as a means of raising defenses. Counterclaims are generally claims that could stand on their own and which could have been filed by the debtor against the creditor if the creditor hadn’t filed first. These must be carefully considered and dealt with. Such a claim could result in an affirmative recovery against the creditor. That means the debtor might win the suit and end up collecting money from the creditor. Often defenses (the product didn’t work) are filed as counterclaims, when they are defenses against the claim, rather than separate recovery actions.