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Fees

Client changed his mind

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Hi,

We were approached by a Ltd company contractor in relation to becoming his accountants. He had been trading for 18 months or so but didnt have an accountant in place.

We agreed the fees by telephone and also via emails. I sent him our terms and asked for his identification docs to which he sent back his id but not the Letter of Engagement.

He then replied to my email with the fees stated on it by sending all of his HMRC company logins, company bank statements, invoices etc. At that point we made a start on the company accounts and got everything finalised apart from a few queries that we then sent to him. He also wanted to change his company VAT scheme from the flat rate scheme to the standard method of accounting for VAT to which we drafted and sent him by email the necessary letter.

A few days later he emailed to say that he had changed his mind and that he didnt want us to proceed. He didnt really give a reason why. I informed him that thats absolutely fine but we would have to charge for our time and as such I sent him an invoice.

He now refuses to pay and informs me that as he didnt sign the Letter of Engagement that no contract was in place. He also states that our fees were not clearly stated but the email he replied to with his bank statements / logins etc, clearly states what the fees are.

So he is refusing to pay (for the above reasons) but to my mind, his intention when he sent us his documents was pretty clear that he wanted us to go ahead. I am not desperate for the fees, but to my mind there is a principle here and so I feel like pushing it to the small claims court if necessary.

Just wondeirng what people think - should I just let it go and move on or stick to my guns?

Thanks

Matt

Replies (19)

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By andy.partridge
18th Oct 2018 14:17

Matt, oh Matt, why would you begin work in the knowledge that the client had not signed your letter of engagement?

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By Duggimon
18th Oct 2018 14:29

I would fee him for the work he has specifically instructed you to do (i.e. the VAT thing) and take the rest as a life lesson.

If he gave you the records but didn't ask you specifically to do anything with them it may be hard to prove a binding contract existed. To my mind, the lack of an engagement letter doesn't mean there wasn't a contract if he's specifically instructed you to do something though.

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By MissAccounting
18th Oct 2018 14:57

Just chalk it down to being a buffoon and dont do it again!

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Glenn Martin
By Glenn Martin
18th Oct 2018 15:13

Ring him and try and agree something with him, if you have done the work he may as well have the benefit of what you have done.

If he wont play ball, get a Thomas Higgins letter to him which may make him cough up.

If not if its only a small fee its maybe not be worth your time pursuing.

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Glenn Martin
By Glenn Martin
18th Oct 2018 15:13

Ring him and try and agree something with him, if you have done the work he may as well have the benefit of what you have done.

If he wont play ball, get a Thomas Higgins letter to him which may make him cough up.

If not if its only a small fee its maybe not be worth your time pursuing.

Thanks (0)
Glenn Martin
By Glenn Martin
18th Oct 2018 15:13

Ring him and try and agree something with him, if you have done the work he may as well have the benefit of what you have done.

If he wont play ball, get a Thomas Higgins letter to him which may make him cough up.

If not if its only a small fee its maybe not be worth your time pursuing.

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Replying to Glennzy:
RedFive
By RedFive
18th Oct 2018 16:29

Do you think he should ring him Glenn ;-)

Hope you are well and things are going well at AM Towers.

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By Watson Associates
18th Oct 2018 16:41

I would bill him for the work carried out. He was fully aware that you were compiling the Accounts as he answered queries did he not. I would also quote him for finalising and/or submitting etc. Did he actually say he had 'changed his mind' or 'I didn't ask you to do it'. Big difference there. I would then sue if he doesn't pay. I had this situation recently and they paid up no problem.

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By Ruddles
18th Oct 2018 16:51

It's a legal issue, but is there not the concept of acceptance of contract terms by conduct?

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Replying to Ruddles:
Hallerud at Easter
By DJKL
19th Oct 2018 10:05

I think it is Homologation in Scots Law.

I believe Rei Interventus may have pretty much died post the Requirements of Writing (Scotland) Act 1995 so is likely not much use.

It is quite sad that one year of law at uni has resulted in my having a patchy recollection of contract law, little recollection of partnership and company law, no recollection of insurance and agency law and delict has merely resulted in an aversion to snails in ginger beer.

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By mattwadz
18th Oct 2018 17:10

Thanks for your responses everyone.

I realise about the Letter of Engagement issue and that I should have waited until it was signed.

However looking at my emails with him - he replied to the quote email with all of his bank statements / logins etc. He then furthermore responded to our email a day or two later with some queries on it - so at that stage its pretty clear that he is happy to go ahead with this.

5 days later and he changed his mind.

To me, its like asking a builder for an extension and then changing your mind after the foundations have been put in - you cant just walk away from things and not pay.

I feel like pursuing it out of principle!!

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Replying to mattwadz:
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By Matrix
18th Oct 2018 19:59

Definitely pursue it and after he pays then send him an email retracting the original offer and say you have changed your mind.

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Replying to mattwadz:
By Duggimon
19th Oct 2018 08:52

IANAL but "so at that stage its pretty clear" does not form a basis for mutual obligations, IMO.

He needs to have instructed you to prepare the accounts. To badly butcher your analogy, it could be said to be like asking a builder for a quote once you've bought the materials, then he shows up and starts laying bricks without you confirming.

I don't believe this is the case and I'm not arguing that your version of events is wrong, I am sure he knew perfectly well you were working on the accounts, my point is you might struggle to prove he owes you for work he never asked you to do.

Still worth pursuing, just don't expect too much and don't pursue it more than it's worth.

Thanks (1)
By Heather Townsend
22nd Oct 2018 16:15

I agree with Glenn and suggest giving him a call is a good way forward.

It looks like he has entered into the contract by sending you the stuff you need and going along with what you needed to get stuff done. So, I would definitely bill him.

But I would find out why he has changed his mind. There may be a good reason.

Thanks (1)
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By [email protected]
23rd Oct 2018 11:51

Signed Letter of engagement or not, his actions as quoted below indicate that he was happy for you to proceed
In my opinion - he got his letter for the VAT and now is trying to shaft you so I'd pursue

"He then replied to my email with the fees stated on it by sending all of his HMRC company logins, company bank statements, invoices etc. At that point we made a start on the company accounts and got everything finalised apart from a few queries that we then sent to him. He also wanted to change his company VAT scheme from the flat rate scheme to the standard method of accounting for VAT to which we drafted and sent him by email the necessary letter."

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By fozia
23rd Oct 2018 12:34

Check your Engagement letter wording carefully there may be a paragraph like ours below, which states if they don't sign but ask you to start the work it is deemed acceptance. If not take him to court out of principal:

"The terms set out in this letter shall take effect immediately upon you confirming your agreement as requested below. If we are instructed to start work before receiving your confirmation we will treat that as acceptance of all the terms of this engagement letter, unless we hear from you to the contrary within 14 days of you giving that instruction."

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By reconynge
23rd Oct 2018 14:02

Hi Matt

First of all, there is a legal contract in place. At the very least implied by the email you received and the actions he took by supplying you the details you requested. You have not stated whether contemporarily you spoke to the client; but to all intents and purposes a contract is in place and, if you proceed to the small claims court via Money Claim Online, you should have a successful outcome.

Now, as regards the Letter of Engagement, of course, this should have been signed. After all, hopefully, it clearly defines the nature of the contract and gives both parties a solid foundation for their working relationship. While yes, there can be legal difficulties without a signature, the absence of signature does not necessarily mean a contract has been formed.

Best of luck!

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By indomitable
23rd Oct 2018 14:35

You most likely have a binding agreement. You made an offer 'your fees', whether he accepted that offer by sending back all the correspondence is a matter for the court. I would say yes, it is is actionable. But this is my opinion.

I would not waste time calling him as he has already refused to pay. First send him an email or letter stating if he does not pay within say 5 working days you will take further action, you can also mention in this letter if you have to instruct a solicitor you will look to recover their fees as well. Then either go straight to the small claims court (if you concur there is a legally binding agreement) which you can do online for £35 I think or get the opinion of a solicitor and act through them.

Or if you think it's not worth the effort (depends how much money is involved) just forget it and chalk it up to experience

Personally I would not let them get away with it. If you are a member of a professional accounting body such as the ICAEW, you can get legal opinions on issues for free so I would do that first and then sue them!

And more importantly in future ALWAYS get the client to sign an engagement letter before you do anything

Thanks (2)
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By indomitable
23rd Oct 2018 16:35

A further thought:

Our professional indemnity insurers also have a free legal helpline, so you might also want to check whether yours have too and call them for advice

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