How to get out of a legally binding contract

Discussion in 'Legal' started by Margaretbetty, Feb 27, 2012.

Thread Status:
Not open for further replies.
  1. Margaretbetty

    Margaretbetty UKBF Newcomer Free Member

    5 0
    Hi,

    I'm new on here so apologies for any ignorance.

    I have unwisely taken out a two year advertising contract that I have asked to be let out of with no success. In this economic downturn I simply can't afford to pay it.


    What will happen if I can't pay, I'd actually like to close the company but this is stopping me.

    Help??
     
    Posted: Feb 27, 2012 By: Margaretbetty Member since: Feb 27, 2012
    #1
  2. smo

    smo UKBF Ace Free Member

    2,094 336
    What does the contract say about termination and penalties?
     
    Posted: Feb 27, 2012 By: smo Member since: Apr 3, 2010
    #2
  3. Rhodes100

    Rhodes100 UKBF Newcomer Free Member

    673 134
    well if you cant pay and the company has no assets, as the saying goes "you cant get blood out of a stone", so taking legal action against the company will be fruitless.

    As long as you have not provided a personal guarantee, or signed it as an individual as part of the contract, it seems that they cannot do anything to you personally.
     
    Posted: Feb 27, 2012 By: Rhodes100 Member since: Feb 19, 2009
    #3
  4. Margaretbetty

    Margaretbetty UKBF Newcomer Free Member

    5 0
    Notice to the company not less than 6 months prior to the expiry of the initial contract (2 years) Should I fail to make any payments the whole of the balance of the agreement shall immediately become due plus costs of collection, I took out the contract in September 2011
     
    Posted: Feb 27, 2012 By: Margaretbetty Member since: Feb 27, 2012
    #4
  5. Margaretbetty

    Margaretbetty UKBF Newcomer Free Member

    5 0
    Thank you, am I right in thinking I cannot close the company down though?
     
    Posted: Feb 27, 2012 By: Margaretbetty Member since: Feb 27, 2012
    #5
  6. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,192 2,058
    If you are a limited company and signed as such then the debt is with the limited company not you, there are a couple of good advisors on here who will tell you how to close the company without further costs
     
    Posted: Feb 27, 2012 By: Chris Ashdown Member since: Dec 7, 2003
    #6
  7. Margaretbetty

    Margaretbetty UKBF Newcomer Free Member

    5 0
    Thank you, I'm new to this so how do find these advisors, just post a new thread?
     
    Posted: Feb 27, 2012 By: Margaretbetty Member since: Feb 27, 2012
    #7
  8. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,192 2,058
    Look up Alan R Price in the members list, he seems a good chap who helps out a lot of people in this type of problem

    Good Luck
     
    Posted: Feb 27, 2012 By: Chris Ashdown Member since: Dec 7, 2003
    #8
  9. mhall

    mhall UKBF Ace Free Member

    2,517 1,119
    Just stop trading, tell everyone you owe money to that the company is ceasing to trade. After 3 months pay your £10 to Companies House and apply for the company to be struck off. Some may object, in which case it will sit there for a while, but just keep referring people to the fact that the company has ceased trading and, assuming you have done nothing illegal they will eventually just go away. This assumes that you have no personal or Directors guarantee on the alleged debt.
     
    Posted: Feb 27, 2012 By: mhall Member since: Sep 8, 2009
    #9
  10. CityEnterpriseServices

    CityEnterpriseServices UKBF Newcomer Free Member

    4 1
    Posted: Feb 28, 2012 By: CityEnterpriseServices Member since: Feb 27, 2012
    #10
  11. Margaretbetty

    Margaretbetty UKBF Newcomer Free Member

    5 0
    Hi,

    I've done everything suggested, I have now applied for the company to be struck off. They have passed it onto two further debt collection agencies and the latest one is saying they are going to commence bankruptcy proceedings. I don't have a personal guarantee as far as I'm aware, can they do this?
     
    Posted: Aug 18, 2012 By: Margaretbetty Member since: Feb 27, 2012
    #11
  12. ITsoldUK

    ITsoldUK UKBF Newcomer Full Member

    2,221 666
    OK Margaret I do sympathise with you however I feel compelled to comment.

    Can you be more specific about the reason why the contract failed?

    I constantly hear 'economic downturn' but that does not wash with me nor my bank manager. Did you plan effectively with the costs of this channel included into your forecast.

    Was it a considered approach to marketing and you potential audience or was it just 'coz it is a big company'?

    Were you pressured into buying by a pushy salesperson?

    Were you assured of this that and the other at the point of sale?

    If none of the above apply then you can get out without paying but where does that leave your supplier?

    How much work has gone into providing you with this service and at a cost to the supplier...

    There are far too many...I can't pay, won't pay so strike me off please going on today for my liking and it is far too easy for ltd to stiff suppliers and phoenix again.

    I am not drawing conclusions on your case as I do not know specifics (as you did not supply them) so this is my humble, sat at my desk on the weekend working AS A SUPPLIER to pay my mortgage and feed my kids.

    So yes, you can get out taking the route (as you have chosen) and move on....as for the supplier, they now have a hole in their forecasts to fill left by you.
     
    Posted: Aug 18, 2012 By: ITsoldUK Member since: Sep 15, 2011
    #12
  13. NickJ

    NickJ UKBF Enthusiast Free Member

    980 211
    As above!

    All good and well asking for advice as to how to brush off a financial responsibility but it's not as morally simple as that. Be interesting to hear the supplier's side!
     
    Posted: Aug 18, 2012 By: NickJ Member since: Mar 29, 2012
    #13
  14. OldWelshGuy

    OldWelshGuy UKBF Legend Staff Member

    20,429 7,048

    If the company is no longer trading then that is an end to it. Are they saying they are going to commence bankruptcy against you personally? If this is the case write to them recorded delivery and state quite firmly that YOU personally have no debt with them and that they should no longer contact you personally as it is a company debt and the company is no longer trading. Tell them that if they continue to harass you illegally that you will take the matter up with a view to getting their consumer credit licence reviewed for breaches of the terms within it.

    Have they, in writing, threatened you personally with bankruptcy? If so then that is all the evidence you need. If theya re telephoning you then include a statement telling them that you are not prepared to accept telephone calls and that you demand this stops and that your telephone numbers are removed from their records. tell them that any breach at all going forward will result in you making a subject access request with a view to taking legal action against them.
     
    Posted: Aug 18, 2012 By: OldWelshGuy Member since: Jun 12, 2008
    #14
  15. Spongebob

    Spongebob UKBF Ace Free Member

    2,158 1,085
    But the OP's company has ceased trading due to insolvency. She has no legal or indeed moral liability to honour a contract taken out by a third party - her company.

    Margaret,

    Do not be intimidated by threats from debt collectors. They cannot do anything against you personally as you do not owe any money. I would write to them as follows;


    Dear Sirs,

    I am in receipt of correspondence from yourselves regarding a debt owed by ABC Ltd to your client XYZ Ltd. As you have already been told on several occasions, ABC Ltd has ceased trading due to insolvency and awaits being either wound up by a creditor or struck off by Companies House.

    As you well know, any liability for the outstanding debt lies solely with ABC Ltd; I have no personal libility whatsoever. At no point has there ever been any contract between myself and your client XYZ Ltd. I would thank you to refrain from any more ridiculous and pathetic threats against myself and trust that this matter is now closed.

    If you are so intellectually challenged tht you have difficulty understanding the basic principles of limited liability may I suggest that you initiate court proceedings against myself in a futile attempt to collect this debt. I will take immense pleasure in defending any action personally with the inevitable result that the case will be dismissed - at no inconsiderable cost to yourselves.

    Yours faithfully,

    M Betty

    It is unlikely that you will hear from them again.
     
    Last edited: Aug 20, 2012
    Posted: Aug 20, 2012 By: Spongebob Member since: Dec 9, 2008
    #15
  16. Steve Sellers

    Steve Sellers UKBF Big Shot Full Member - Verified Business

    4,052 1,210
    True but the OP titled the thread "How to get out of a legally binding contract!". That's a whole other thing. Insolvency legislation is a tool to encourage entrepreneurship and growth, it is not a system to be abused by the feckless.

    The OP says "I have unwisely taken out a two year advertising contract". Feckless is the first thing that comes to mind.

    There is almost certainly a legal and moral duty for her to try and honour the contract. She runs the company and has fiduciary duties to the company itself - that does not include making feckless decisions. So I totally disagree, that this is a simple case of "shut the limited company and to hell with everyone else".

    Perhaps, though, it is simply the way the OP worded it.....:|
     
    Last edited: Aug 20, 2012
    Posted: Aug 20, 2012 By: Steve Sellers Member since: Aug 7, 2011
    #16
  17. Spongebob

    Spongebob UKBF Ace Free Member

    2,158 1,085
    That's my reading of it.

    The OP clearly thought that the contract was binding on her and that she was unable to close down her insolvent company with it in force.

    Fortunately for her, she is wrong on both counts. All anyone has done is point this out.

    There is no such duty. If her company is now insolvent, her primary duty is to cease trading. That is the law.

    If the company was insolvent when she signed the contract, there is technically some comeback. However, this would be almost impossible to prove.

    I don't know why we're getting so het up anyway. There is no suggestion that the advertising company has actually provided any services yet, so they are not really out of pocket.
     
    Posted: Aug 20, 2012 By: Spongebob Member since: Dec 9, 2008
    #17
  18. Steve Sellers

    Steve Sellers UKBF Big Shot Full Member - Verified Business

    4,052 1,210
    No Spongebob there is always a duty, you however are referring to the doctrine of privity of contract to prevent the contract being binding upon the OP. There is also the duties under the companies Act - http://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2/crossheading/the-general-duties


    The veil of incorporation is not limitless, and the notion that any comeback is "almost impossible" is crazy. Anyone reading this thread will think "I know I will take out a contract, and if I cant pay I will just open another limited company, who care, no comeback whatsoever". This is NOT what the insolvency laws and limited company laws are for. In this case there may be no legal case to answer, but the general advice being given is quite unethical in my opinion.

    You say there is no suggestion the advertising company has provided services, except for "Notice to the company not less than 6 months prior to the expiry of the initial contract (2 years) Should I fail to make any payments the whole of the balance of the agreement shall immediately become due plus costs of collection, I took out the contract in September 2011".


    OP if your company is insolvent then sink it and move on. If your company has gone insolvent because you foolishly took out this contract then I have little sympathy but use the insolvency laws and let your company sink.

    If you can trade through the downturn, but this contract just means it will be hard work, or just that your profit will be reduced then you shouldn't rely on the insolvency laws. :)
     
    Last edited: Aug 20, 2012
    Posted: Aug 20, 2012 By: Steve Sellers Member since: Aug 7, 2011
    #18
  19. Lucan Unlordly

    Lucan Unlordly UKBF Ace Free Member

    1,303 241
    Can somebody point out to me where the OP said the company was insolvent?

    She said she would like to close the company but couldn't because of the demand from the advertising company.

    Has the company got any assets?
     
    Posted: Aug 20, 2012 By: Lucan Unlordly Member since: Feb 24, 2009
    #19
  20. Maxwell83

    Maxwell83 UKBF Regular Free Member

    519 120
    The original post suggests it.
     
    Posted: Aug 20, 2012 By: Maxwell83 Member since: Aug 4, 2012
    #20
Thread Status:
Not open for further replies.