Contractual disputes for debt recovery: Q&A
Find legal questions and answers about:
1. Contractual disputes – definition and types
What is a contractual claim?
A contractual claim refers to the amount of money owed by one party (the debtor) to another party (the creditor) under the terms of a contract between them. Such a claim arises when one party (the creditor) is entitled to receive a payment or another form of performance from the other party (the debtor) based on a contractual agreement.
A contractual claim can be pursued in court when:
There is a contract.
The contract serves as the legal basis for the claim, establishing the obligations of each party. It may be written or, in certain cases, verbal. However, written contracts provide greater legal certainty. The contract outlines the terms and conditions, including the amount owed, payment deadlines, and any applicable penalties for delays.
There is a creditor.
The creditor is the party entitled to receive the payment or performance. To pursue a contractual claim in court, the creditor must have fulfilled their contractual obligations and, consequently, be entitled to receive the agreed consideration.
There is a debtor.
The debtor is the party obligated to make the payment or provide the performance. In contractual disputes concerning debt recovery, the debtor is the party that has failed to fulfill its contractual obligations.
There is an unfulfilled contractual obligation.
This may involve the payment of money, the delivery of goods, or the provision of services. The unfulfilled obligation can be directly derived from the contract or inferred from its terms.
What is a contractual dispute?
Contractual disputes are legal proceedings through which parties to a contract seek judicial intervention to enforce their rights against the opposing party.
What are the types of contractual disputes?
Contractual disputes can be categorized as follows:
Disputes over non-performance of obligations: Occur when one party completely fails to fulfill its contractual obligations.
Disputes over improper performance: Arise when obligations are fulfilled but not in accordance with the contractual terms (e.g., delivery of non-compliant products, substandard services).
Disputes over contract interpretation: Emerge when parties have differing interpretations of specific contractual clauses.
Disputes over contract termination: Occur when one party seeks to terminate the contract, but the other party opposes or does not comply with the termination conditions.
Disputes over payment and debt recovery: Involve the non-payment of amounts owed under the contract, necessitating legal action for debt recovery.
Disputes over damages: Relate to claims for compensation for losses incurred due to the other party’s failure to meet contractual obligations.
What are the most common causes of contractual disputes?
Common causes include non-payment of contractual amounts, non-performance or improper performance of obligations, differing interpretations of contractual clauses, and unilateral modifications of contract terms.
How can contractual disputes be prevented?
Effective prevention involves drafting clear and detailed contracts, explicitly defining each party's obligations, and specifying penalties for non-performance. Using professionally prepared contracts can minimize risks, and Docs & Deeds offers a convenient solution for obtaining such contracts.
Which court has jurisdiction over contractual disputes?
Jurisdiction is determined by the value of the dispute, the identity of the parties, and the type of contract involved. Typically, the court at the defendant's place of residence or the court specified in the contract's jurisdiction clause will have the authority to resolve the dispute.
2. Contractual disputes – how to prove the existence of a claim
What documents are needed to recover a contractual claim?
The required documents depend on the type of contractual dispute. Typically, they include:
The contract between the parties.
Invoices, receipts, payment orders, or other proof of the debt.
Notices sent to the debtor.
Any other relevant correspondence.
What should a payment notice include to be legally valid?
A payment notice sent by the creditor to the debtor must include the following:
Details of the debt (amount, due date).
Legal basis (contract, invoice).
Payment deadline and consequences of non-payment (legal actions or penalties).
Generally, sending a payment notice before initiating legal proceedings is optional. However, in some cases, it is mandatory, and the absence of such notice may result in the dismissal of the claim (e.g., in the case of a payment order procedure).
How can I prove the existence of a debt without a written contract?
If no signed contract is available, other evidence can be used, such as: e-mails, messages, invoices, receipts, or, in some cases, witnesses who can confirm the existence of a verbal agreement and the obligation to pay. Read more about the burden of proof.
Is an invoice sufficient to prove the claim?
An invoice is significant evidence but is stronger when accompanied by proof of receipt or acceptance of the goods/services by the debtor, such as: delivery confirmation, receipt signature, or correspondence acknowledging the invoice.
Can an email be used as proof of the claim?
Yes, emails can serve as evidence if they clearly show: existence of the debt, acceptance of obligations, or confirmation of delivered goods/services. It is essential to keep the entire conversation thread for context. Also, the parties involved in the correspondence must have the authority to represent the company in the contractual relationship.
What role do witnesses play in proving the claim?
Witnesses may confirm the existence of a verbal agreement or performance of obligations (e.g., provision of services). Their statements must be consistent and credible to support the claim in court. However, most claims cannot be proven solely through witnesses, highlighting the importance of using written contracts in business dealings.
How can written correspondence be used to prove the claim?
Registered letters with acknowledgment of receipt or notices sent by email can demonstrate that the debtor was informed of the debt. However, the debtor's failure to dispute the debt after receiving a payment notice does not equate to an implicit acknowledgment of the claim and is insufficient in debt recovery litigation.
How important is the acknowledgment of the debt by the debtor?
A written acknowledgment (e.g., email, message, written statement) from the debtor is compelling evidence as it confirms the existence and amount of the debt.
Can a bank statement be used to prove the claim?
Yes, a bank statement showing money transfers can support the claim, especially when the amounts correspond to the invoiced values and are accompanied by relevant details (e.g., invoice number or service description).
Is it necessary to have a lawyer to prove the claim in court?
It is not mandatory, but a lawyer can assist in organizing evidence, drafting the lawsuit, and representing the case in court, increasing the chances of success.
What happens if the debtor denies the existence of the claim?
If the debtor disputes the claim, the creditor must provide strong evidence such as: contracts, invoices, correspondence, and witnesses to convince the court of the payment obligation.
Can a phone conversation be used as proof of the claim?
Phone conversations can be used as evidence if they are recorded legally and with the consent of the parties.The content can later be confirmed through messages or emails summarizing the discussion.
3. Contractual disputes – about court procedures
What are the initial steps in the process of recovering a contractual claim?
The initial steps include:
Verifying the existence and validity of the contract.
Sending an official notice to the debtor requesting payment of the debt.
Attempting to negotiate an amicable settlement with the debtor.
Determining the appropriate judicial procedure for debt recovery.
Various claims may entitle the creditor to file different types of lawsuits.Certain, liquid, and due claims resulting from contracts can be recovered more easily when their existence is undisputed – see the payment order procedure.Contractual claims arising from complex situations between the contractual parties without a determined existence or amount are generally recovered through common law actions based on contractual liability.
How does a contractual debt recovery dispute progress?
The creditor files the lawsuit with the competent court, accompanied by evidence of the claim. The debtor is summoned and may file a defense, either disputing or partially acknowledging the debt.
The case is heard in the first instance, where the court examines evidence (documents, witnesses, expert reports) and listens to both parties. After the hearings, the court issues a ruling, which may:
Oblige the debtor to pay,
Dismiss the claim, or
Order other legal measures.
The dissatisfied party may appeal the decision, leading to a retrial at a higher court.After the appeal is resolved, the decision becomes final. In certain situations, a second appeal may be made.
How long does the process of recovering a contractual claim take?
The duration varies significantly depending on the complexity of the case, the debtor's cooperation, and the judicial procedures.
A payment order procedure is relatively quick, typically 3-6 months for a court ruling (which can be appealed).
Common law actions usually take around 1-2 years (the judgment can be appealed, generally followed by a second appeal).
What is enforcement?
Enforcement is a legal procedure that implements a court ruling or a contract/other document constituting an enforceable title, compelling the debtor to pay the debt.This may involve:
Garnishing bank accounts or
Selling the debtor's assets.
Can I recover expenses incurred in the debt recovery process?
Yes, the court may order the debtor to cover the expenses incurred by the creditor for debt recovery, such as:
Lawyer's fees or
Court fees.
Can I request late payment penalties if they are not specified in the contract?
If not specified in the contract, legal interest for late payment may be requested according to the applicable legislation. Consulting a lawyer is recommended to determine the legal basis.
Can I recover court costs in a contractual dispute?
Yes, if the court rules in favor of the creditor, court costs (e.g., stamp duties, lawyer's fees) may be recovered from the debtor according to the court's decision. Read more about legal expenses of a lawsuit.
4. Contractual disputes – what to do when the debtor has no money
What happens if the debtor has no assets or income to pay the debt?
In such cases, recovering the contractual claim can be difficult or even impossible.The creditor may:
Obtain a court ruling or
Initiate enforcement procedures, hoping the debtor’s financial situation improves in the future.
To avoid such situations, it is essential to consult a litigation lawyer promptly.In many cases, creditors have access to precautionary measures over the debtor's assets that can be effectively used.
How can I secure debt recovery if the debtor is transferring assets?
There are precautionary measures that creditors can use to freeze the debtor’s assets.These measures prevent the debtor from disposing of their assets until the dispute is resolved.They must be expressly requested by the creditor and usually require the creditor to post a bond.
What happens if the debtor has already transferred assets to avoid payment?
If the debtor transferred assets to avoid paying the debt, the creditor may file a paulian action to reverse the effects of the transfer.
A paulian action is a lawsuit through which the creditor requests the annulment of the fraudulent transfers made by the debtor to prevent debt recovery.
To succeed, the creditor must prove:
The transfer was made to defraud the creditor (e.g., a gift to a family member or a sale at a very low price),
The debt existed before the transfer, and
The third party who received the assets was complicit in the fraud or was aware of the debtor’s financial situation.
What happens if the debtor avoids payment by not recovering claims from their debtors?
If the debtor refuses to recover claims from third parties, endangering the creditor's right to recover their debt, the creditor may exercise the debtor's property rights against third parties through an oblique action.
For example, if the debtor does not collect a debt from another third party, the creditor can initiate the action on their behalf to recover the amount.This action does not annul the transfer of assets (as in the case of a paulian action) but instead enforces the debtor's property rights that could be executed to cover the claim.
What happens if the debtor declares insolvency before initiating the contractual dispute?
If the debtor enters insolvency, the debt must be included in the insolvency estate.The creditor must:
Submit a claim application to the competent court, and
Recovery will depend on the available funds and the priority order of creditors.
Note: When the debtor enters insolvency, separate contractual disputes can no longer be initiated. The insolvency procedure is the only way to recover debts.
What happens if the debtor declares insolvency during an ongoing contractual dispute?
If the debtor enters insolvency during a contractual dispute:
The litigation is automatically suspended, and
The creditor must file the claim in the insolvency estate.
Debt recovery then depends on:
The reorganization plan or
The liquidation of the debtor's assets.
5. Contractual disputes – other important aspects
What is the statute of limitations for debt recovery?
The statute of limitations is the legal period within which the creditor can initiate a lawsuit to recover the debt.After this period expires, the creditor loses the right to seek payment through the courts.
The general statute of limitations is 3 years for most contractual claims.However, special limitation periods apply to certain contracts.
Tip: If you have a contractual issue, consult a lawyer as soon as possible to avoid jeopardizing your rights.
What alternatives are there to going to court for debt recovery?
Alternatives include:
Mediation: In Romania, mediation ends with an agreement between the creditor and the debtor. This agreement acts like any other contract, meaning if one party does not comply, the other can initiate a contractual dispute.
Direct negotiation: Direct negotiations are the most efficient when feasible, helping parties avoid lengthy and costly disputes.
Using a debt recovery agency.
Initiating enforcement procedures through a bailiff.
Only creditors holding enforceable titles can skip the court stage and go straight to enforcement.
Can the contract be modified during litigation?
Yes, the contract can be modified by written agreement between both parties, even during litigation, if they wish to reach an amicable settlement.
The modification must be communicated to the court, which may close the case if all claims are resolved.
What happens if the parties reach an amicable settlement during the trial?
If the parties reach a settlement, they can request the court to acknowledge the agreement, leading to case closure.
Once approved by the court, the settlement has the same value as a court ruling and becomes enforceable.
How do penalty clauses influence contractual disputes?
Penalty clauses facilitate the process of proving damages, as the creditor is only required to demonstrate non-performance or delay.
These clauses are especially advantageous in contracts between professionals, as they alleviate a substantial portion of the burden of proof in instances of contractual non-fulfillment.
The court has the discretion to reduce the amount of penalties if they are deemed excessive.
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