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Daniel at Civico raises an issue that faces business owners time again about payment for work not delivered as required and what the legal position is. In this blog I have sat down with our commercial litigation expert at Cobbetts, Adam Forster, and set out some of the key considerations that business owners must know to understand where they stand legally in these circumstances.

As a starting point, if you have a written contract you need to look at its terms carefully – remember, this may incorporate standard terms and conditions of one of the parties. Depending on the wording of the contract, you may only have to pay if the contractor has completed all of the work. In Daniel’s case, if the contract does say this Civico would not have to pay any part of the price.

However, be aware that:

1.If you have agreed payments for distinct stages of the work, then the contractor may be able to recover some money for the work he has done, even though he has not fulfilled his obligations entirely. This is because each stage is treated like a separate contract and the completion of each stage gives rise to the right to payment.

2. If you accepted that the contractor would be allowed to partially perform his obligations, then the contractor could bring a claim against you on a quantum meruit (us lawyers love to throw in the odd latin phrase) basis – this means he can seek a reasonable sum for the work he has done.

3. If there is an event outside the control of the parties which has made it impossible to perform the contract, then there is no breach of contract, as the contract comes to an end at the time of the event and the parties do not have to perform future obligations. Accordingly, the contractor would be under no obligation to deliver the work and, equally, you would be under no obligation to pay for it.

Whatever the legal position however the parties have to consider any future working relationship. It may be that you want to maintain a relationship with this contractor for future projects and therefore consider that it is appropriate to pay the contractor for the invoiced amount in order to preserve good relations.

Alternatively, depending on the nature of the relationship, you may find that you can negotiate a payment, on a without prejudice basis, which is less than the invoiced amount and which both parties think is fair.

It is also important to bear in mind that even if there isn’t a formal written contract and a legal contractual relationship can still exist through oral agreement or course of dealing. So the facts surrounding your relationship may also have some bearing on the legal position.

In their latest post the Soshi Games chaps relate their experiences of video conferencing with potential investors. It sounds like they had a positive experience but prompted the question would an angel investor part with their cash purely on the basis of video conference meetings.

Angel investors certainly have the ability to be idiosyncratic so I would not dismiss the notion of them investing via this route. I  suspect it ultimately depend on what their key driver for investing is e.g. your operating in their 'pet' sector, they are merely seeking the tax shelter etc.

Institutional investors however are very much a different breed...
In general terms a golden rule of investment remains 'management, management, management'. It is a well trodden path that good management can turn a bad business round in the same way that bad management can ruin a good business. People invest in people. As such I would be surprised if any institutional investor would invest without the proper face to face interaction to be able to make a personal judgement on the individuals behind a business.

Video and web conferencing is however becoming more and more common place, and with the technology improving rapidly could be a good way to progress to a later stage in the investment process before a face to face meeting. Would reduce car or air miles too! We see this approach a lot with our portfolio companies where Webex is increasingly being used in the earlier stages of the sales process prior to face to face meetings.

Technology always moves the world on and so I am sure it will only be a matter of time before an investor fully embraces this approach and proves me wrong!

Post investment is a bit of a different matter though. It becomes a bit more difficult to have valuable interaction between investor and investee via video conference. This is important because, although over quoted, it is true that good investors provide more than just money. The ability to be able to meet with them over coffee to discuss strategy or sales opportunities in an unscheduled informal manner is often invaluable.

 So - video conferencing good or bad? Anything that helps widen access to finance for small and growing businesses can only be a good thing.

Understanding how to access investment and finance for your business has never been more important. Equity finance (investment in exchange for shares in your business) will have an increasingly important role to play in the coming months and years for the early stage growth business.

The good news for Cliff and Kevin is that they’ve been through the process once and so have some understanding of what is involved. But to help them assess their current dilemma around investment, here are 5 tips for why and when to raise equity finance: