Can someone cancel a Cheque having signed a Customer Acceptance form?

grabul · Nov 14, 2008

I have a company that works on ships carrying out electrical and plumbing installations. Recently I have been installing switch panels on a new boat. The company owner has walked round the boat with me, discussed some slight aesthetic concerned with 2 of the switch panels. They signed a customer acceptance form and these panels were paid for in advance.

On the same vessel we had a small workforce carrying out installations on a day works basis, again we have signed day work forms and so he duly wrote a cheque for £7437.76 for the labour charges on the day works which takes into account a refund I gave him which is detailed below. He also signed another customer acceptance form stating that we have not completed installation but he was withdrawing our services In this form I stated that the wiring and termination had not been completed, therefore the testing and commissioning had not been completed and that the vessel was due to be completed by yard staff or other contractors. It is a customer acceptance form and he understood and was happy with that. This all took place on 7th November 2008.

Today, the 11th of November he rang to say he has stopped the cheque because he is now not happy with the 2 switchboards, value £6786.92 and the drawings which he could not understand Value £4406.25. With regards the design and drawing costs, I had already discussed this with him on the 7th and agreed to refund this money and supply the drawings up to the date we left site as a goodwill gesture for which I gave him back £4406.25 off the last set of invoices (for the labour) which should have been £11844.01 (£4406.25 + £7437.76).

He is stating that he does not believe that the boards will be fit for class, but has no reason for saying this. I have talked to class and they have stated that until I produce the as fitted drawings they cannot comment.

My question is; can he cancel the company cheque just like that with no real premise, even though he has signed to state that he has accepted the panels and service? He is claiming, of course, that he signed them under duress. Also he is stating to the ship owner that we "walked off site" which is an untrue and potentially damaging statement. I have sent a statement to all concerned refuting this. What is my legal standpoint?

KidsBeeHappy · Nov 14, 2008

There are two issues.

(1) Can he cancel the cheque - yes, if he is valid signatory then yes he can. Morally it stinks, but on a pratical basis, the bank aren't going to check with you before cancelling. Infact, i think that legally, there is a period of up to 90 days even after a check is banked that it can still be cancelled.

(2) What can you do about it? - What is the current status of the work? Sorry to be a bit thick but who is Class, they're statement sounds a bit wossy, as its the equivalent of saying lets build a sky scraper and see if it falls over. Engineering is engineering and i would imagine that that should be able to resolve this from drawings. if you're product doesn't meet the drawings then that's a seperate issue all together.

streetslocal · Nov 14, 2008

:|Is it not illegal to cancel a cheque after recieving a service under the amended fraud act?

grabul · Nov 14, 2008

Class is the regulatory body which certificates equipment put on board ships.

But if he is not sure whether the boards would meet class, why sign a customer accepance form in the first place, and the cheque stopped was for more that the cost of the boards by far. I was led to believe that issuing a company cheque takes away the ability to contest an invoice and that issuing such a cheque was an irrevocable promise to pay. To my mind if he has signed a customer acceptance form, which has a section for him to fill out if he has concerns before he signs it and copies it, then he has accepted the goods even if they do not pass class (which they will, I know they will, its what I do for a living

)I still hold the drawings for the boards and will not relinquish them until he pays in full so the boards are next to usless to him without these to get them approved by class, the product does meet the drawings because I have designed and built them so I have done the drawings to go with them.

I am wondering if he is unable to pay, since the amount exceeds the value of the boards themselves, and maybe he realises this and thats why he stopped the cheque since to issue a company cheque without sufficient funds is an offence within itself, but since he will not respond to me in writing I see it that I have no option but to start winding up proceedings against him.

streetslocal · Nov 14, 2008

grabul said:
Class is the regulatiry body which certificates equipment put on board ships.

But if he is not sure whether the boards would meet class, why sign a customer accepance form in the first place, and the cheque stopped was for more that the cost of the boards by far. I was led to believe that issuing a company cheque takes away the ability to contest an invoice and that issuing such a cheque was an irrevocable promise to pay. To my mind if he has signed a customer acceptance form, which has a section for him to fill out if he has concerns before he signs it and copies it, then he has accepted the goods even if they do not pass class (which they will, I know they will, its what I do for a living )I still hold the drawings for the boards and will not relinquish them until he pays in full so the boards are next to usless to him without these to get them approved by class, the product does meet the drawings because I have designed and built them so I have done the drawings to go with them.

I am wondering if he is unable to pay, since the amount exceeds the value of the boards themselves, and maybe he realises this and thats why he stopped the cheque, but since he will not respond to me in writing I see it that I have no option but to start winding up proceedings against him.

For whom did you invoice a LTD company or an individual?

grabul · Nov 14, 2008

No it is not a Ltd company.

streetslocal · Nov 14, 2008

grabul said:
No it is not a Ltd company.

So it wouldnt be a winding up,you would need to look towards bankruptcy proceedings.
But i would send a legal letter firstly to show your intent,do this through a solictor

KidsBeeHappy · Nov 14, 2008

Do you still have his boat?
If you have this you can withold it until payment is made for outstanding services, i think this is still the case, it definitely used to be?

My recommendation would be to keep hold of it and not finish the work until you've got proper legal advice.

grabul · Nov 15, 2008

No I dont have his boat, it is 26 metres long and in a dry dock

but nice idea, it make me chuckle at his face as I drove off with his boat, thanks. Thanks all, will book up an appointment with the solicitor on monday.

bwglaw · Nov 15, 2008

You can sue on the canceled cheque alone.

grabul · Nov 16, 2008

bwglaw said:
You can sue on the canceled cheque alone.

But wont that cost a lot of money? I have only just started this company and believe it or not this was the fist job I have done out there on my own, so my company has no funds now, in fact I have had to take out a loan to pay the people that require payment so how can I afford to sue?

bwglaw · Nov 16, 2008

You do not have much choice other than to sue. You are running a business, do you have insurance that may cover legal expenses? Either way, contact a local lawyer to discuss your claim.

You could always try a debt collection agency, whether that will get results is a another matter.

G. Lasagne · Nov 16, 2008

i had a similair problem last year, although the cheque was only for 3000 or so. i cashed the cheque, it cleared in my bank and 2 days later it left my account.
i rang the bank and they told me that a cheque can be cancelled 6 days after it has been paid in, and they do not endorse cheques as payment, even though they issued me the cheque book, they said they are not reckognised as legal tender and more of an iou type payment.
anyway the problem was sorted and i received payment a week later.

crazy bankers

p.s ever thought of a mobile card terminal, its something im thinking of, although this has only happened once.

also there is a service called transax(i think) who guarantee any cheque you receive before its even paid in, think its quite expensive though but might be worth it if you receive cheques for 10's of thousands.

dave

grabul · Nov 16, 2008

I understand what your saying, but, if the company simply does not have £10k to pay a solicitor to persue the debt who's gonna pay. The last time I tried to sue, in a previous incarnation of my company, it cost me £15k to recover £20k and then I settled out of court because it was gonna cost about another £7k or when I got divorced, my solicitor kept telling me to fight but never told me it was a hopeless case until I reached £17k in legal fee's and then still lost over £300k to an ex who commited adultery so you will have to excuse my trust in the legal profesion since they have done nothing but add salt into the wound in my experience. Solicitors seem to be very good at telling you you have no option but to sue, but dont seem to tell you that it may well cost more than the debt in the first place and if the company does not have the funds to pay, where are they going to look, to me, sorry I have just remortgaged my house to start the company up, I simply have no more money to pay a big fat cat solicitor to drag proceedings out longer to get himself a better holiday, which is what I suspect will happen.

bwglaw · Nov 17, 2008

Divorce proceedings are incomparable to this situation. Not all solicitors are the same and painting them with the same brush is going to achieve nothing. It will not cost you anything to discuss your matter with a solicitor. You are then entitled to ask about the fees. Costs are likely to be recoverable. The question you need to ask and think about is whether the debtor has the means to meet any judgment if awarded to maximumise your chances of recovering the debt in full.

If this situation has happened before you really do need to change the way you operate otherwise it is going to eat into your profits each time. I do not know your exact line of work but is it not possible to ask for upfront payments and scheduled payments thereafter in order to keep the liabilities down?

grabul · Nov 17, 2008

Yes point taken.

anyway, I have booked to see my solicitor as I see no amicable way around this.

A friend did say that what he has done is to set up another company with no assets and used this to trade with the more dodgy people in the industry and if it came to this sort of scenario (as he is now, not suprisingly counter sueing) and if it does go all wrong he simply shuts the company down. Would this be an option, sounds a bit dodgy in itself to me.

grabul · Nov 17, 2008

Ok just had a long chat to a solicitor (Lamport Bassit, Southampton). Very nice and honest man, basically the guy has not got a leg to stand on but, I have to decide whether I require him to act upon it or simply try to work something out or just walk away from it. The customer acceptence form is the crux to the matter and goes way in my favour, but he would not waste to much money chasing it. Problem is, the other man has suggested that he will counter sue for the whole cost of the job (neither of us was sure how he was proposing to do this) and that may prove hideously costly. So the best advice is to just walk away from it and put it down to experience. That leaves a nasty taste but in some ways makes a bit of sense.

KidsBeeHappy · Nov 17, 2008

Are you a member of FSB? the FSB offers commercial contract protection, which might cover the legal fees/costs of enforce or recompensing for this contract.

(or as mentioned above you business insurance may have this included - time to check the small print).

(And if you're not a member, join, from £100 per year its worth the peace of mind knowing that you're not a sitting target in situations like this.)

bwglaw · Nov 17, 2008

The customer acceptance form will be essential for challenging any potential counterclaim. The stopped cheque will support your claim for the entire amount. I would now look at the debtor as to whether he/she is worth pursuing to ensure they have assets or means to pay the debt. Whatever the answer to this, should be your answer whether to pursue it.

I would also follow up the other poster's suggestion regarding FSB.

grabul said:
Ok just had a long chat to a solicitor (Lamport Bassit, Southampton). Very nice and honest man, basically the guy has not got a leg to stand on but, I have to decide whether I require him to act upon it or simply try to work something out or just walk away from it. The customer acceptence form is the crux to the matter and goes way in my favour, but he would not waste to much money chasing it. Problem is, the other man has suggested that he will counter sue for the whole cost of the job (neither of us was sure how he was proposing to do this) and that may prove hideously costly. So the best advice is to just walk away from it and put it down to experience. That leaves a nasty taste but in some ways makes a bit of sense.

grabul · Nov 17, 2008

Thanks for the advice, can I join FSB now and use the commercial contract protection in this case. I would have suspected that it would be to late, but if I can survive this one rest assured I will be taking out as much legal protection as I can afford. Don't want to be going through this again

. I will keep you posted as to any developements.

KidsBeeHappy · Nov 17, 2008

I think the situation is that they'll advise, but not cover any expenses of cases started before you join. But it would be worth discussing, because you haven't actually stated any legal proceedings yet, as i understand it.

bwglaw · Nov 17, 2008

grabul said:
...can I join FSB now and use the commercial contract protection in this case...

This will be a matter of policy with the FSB. You have not started any legal proceedings yet and may come within their policy if the FSB policy does cover legal costs beyond advice.

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